by Joseph Kenny | 01/5/09

Credit cards are easily one of the biggest aspects of our modern economy. They play a huge role in the way millions of Americans conduct their daily affairs, from dining to buying clothing, car repairs to purchasing entertainment. However, they are also a huge source of debt for the people who use them. Credit cards, with all the convenience they provide, perhaps provide too much in this sense - they make it very easy to buy more than what a person can afford.

Because of the way they accumulate debt, credit cards are often something that people don't know what to do with. They end up getting in serious debt with them, and then try to maintain them by paying only the minimum on their balances in order to get by. This is a very bad habit for numerous reasons, but perhaps the biggest one is the fact that it only allows debt to maintain itself in a very harmful way.

There are numerous forms of debt that the average American household has to deal with on a monthly basis. Making payments on a home mortgage, paying off car loans, meeting the expenses of utilities, and having to purchase food are just some of the things almost any family has to deal with. Credit cards can add to this in a very destructive way; it's especially true when debt has been allowed to accumulate to the point that a household income can barely meet. When this happens, people make minimal payments, which is bad because it allows interest to accumulate.

Credit cards all carry interest, and all the debt that accrues on a card gets this interest added to it as a way of paying back a card company for the services it provides you. It's not a wrong way to do business, but it can become a very big problem if you don't address it.

People who pay only the minimum on their debts hardly cover the interest that they owe. This is something that banks and card companies look forward to, because it allows them to make a very generous amount of money from your expenses in terms of loans and credit purchases. When you pay a minimum amount, you don't cover much in terms of interest. Because of it, it'll take you many years to pay off a balance, and you can easily end up paying thousands more than what you originally charged on a card or borrowed from a bank. Obviously, this is something you should avoid.

In order to prevent your debt from becoming financially ruinous, you should always strive to make the biggest payments you can manage. Of course, this may not be possible for every debt you have. In that regards, you should focus on your debts that have the highest interest. This is a case where making the minimum payment is worthwhile, but only towards debts you're not actively fighting. It can't be stressed enough: if you want to eliminate debt, you have to aggressively pursue paying it off until it's gone. But, it's also important to give priority to individual debts with the highest interest. Don't succumb to the unnecessary expense of interest rates; pay what you owe in full and don't sit on what you owe.