High Interest Rate Credit Cards Cause Vicious Cycle

Credit cards may be a lifesaver when you run out of funds to purchase groceries and you have hungry children.  Or your dishwasher breaks and you can only afford to make payments over time.  There is a point when the credit card turns from a useful tool into a budget wrecking and money sucking thing.  This is when the credit card balance reaches a level beyond which the individual cannot easily pay down, and the interest on the account is basically equal to the minimum monthly payments.  This cycle of making the minimum monthly payment but never seeing the principal balance decrease can go on for years.

In today’s economy with layoffs and other financial problems it can be easy to get sucked into the vicious credit card cycle.  It is especially easy with the high interest rate cards that are offered (a large majority of our clients cards are over 20% and I have even seen cards with rates as high as 36%). 

Something needs to give to break that cycle.  Some individuals can do it by devoting more money each month to the payments.  Other individuals simply cannot devote more than the minimums.  Bankruptcy protection, Chapter 7, Chapter 13, and Chapter 11, can provide a way to break the cycle.  In Chapter 7, Chapter 13, and Chapter 11 individuals may be able to discharge (get rid of) their credit card balances (subject to qualification standards set forth in the bankruptcy code).