In a recent blog post, we discussed the potential dangers of credit card debt. This report also found that the total credit card debt in the United States reached an all-time high at the end of 2019.
Since most adults have at least one credit card, they are often well aware of the risks that come with a credit card. But why is it that credit cards carry such a high risk of debt?
Many factors could go into that answer. However, just one of those factors involves a credit card’s revolving debt.
Credit cards offer a revolving debt – but what is that?
Revolving debt is a debt that individuals will almost always carry because it is how the account – usually a credit account – operates.
It is an open-ended account or a line of credit that individuals can borrow against to pay for goods. And as they repay the debt they borrowed in the account, the amount available to borrow increases again. Essentially, it is an easy and flexible way for individuals to borrow money whenever they need it since it is already linked to an account in their name.
Some common examples of revolving debt include the average credit card as well as a home equity line of credit (HELOC).
Revolving debt is not inherently harmful. However, it is essential to use great care and strategy to avoid the risks that could come with it.
How to stay ahead of revolving debt
Regardless of whether individuals are still facing significant debt or they recently completed a Chapter 13 bankruptcy repayment plan, they might be looking for ways to avoid more debt. So, some tips to stay ahead of revolving debt include:
- Keeping the credit balance low, to reduce the stress of repaying the full amount each month;
- Limiting when one uses the credit card, such as for occasional purchases instead of regular ones; and
- Paying bills on time to reduce the time individuals spend paying the debt off, as well as the interest due on the debt.
With credit cards, there is really no way to avoid having revolving debt. But knowing how it works can help individuals keep this kind of debt under control.