Credit Card Debt

Credit card debt incurs when you pay for items or services using a credit card and do not pay it off. This type of debt is known as an ‘unsecured debt’, meaning it does not offer the added protection of a guarantor, or collateralize specific assets belonging to the borrower in the event of a liquidation, bankruptcy, for failure to adhere to the repayment terms.

Credit card debt is among the most common personal debts. The buy now, pay later mindset can lead to overspending if left unchecked, leading to spiraling financial issues. When ‘later’ arrives and the cardholder must pay for the goods that were purchased (typically consumer goods like clothes, groceries, services and holidays) as well as charges and interest, the balance may have grown beyond what was anticipated, leading to problems with repayment.

You should also be wary of making cash withdrawals using a credit card, as the interest is typically charged from the day you take the cash out, increasing on a daily basis. The charges are also high – potentially as much as 4% or more, depending on the company. The interest rate, also, tends to be higher for cash withdrawals.

As well as late fees and interest, individuals experiencing credit card debt that they are struggling to pay may receive increased interest rates on their credit card and risk incurring damages to their credit scores. Continuing to fail to make payment can lead to further consequences, including:

  • Your credit card being frozen
  • Your debts being sold on to a collection agency
  • You may be sued by the collector of your debt, leading to having your wages garnished

Common personal debts – including credit card debt – do not rely on the threat of imprisonment to enforce them. You are encouraged to make a complaint if a creditor does make this threat towards you.

The risk to your credit score is a common concern to those struggling to control their credit card debt. Indeed, it is true that information regarding how you use your card can be shared by your credit card provider, leading to an update to your credit score. Future creditors may see this information and reconsider lending to you, based on the supposedly increased risk of no payment.

If you are falling behind on payments and are concerned, you can get in contact with your credit card provider to discuss the situation and negotiate an amount that you are able to pay each

month. Some creditors may agree to a ‘full and final settlement’ to pay off the debt, which amounts to less than the total amount owed – if you have the funds to pay it promptly.

Solutions Scotland is a trading style of Milton & Stirling Ltd, Company Number SC587851 – Solutions Scotland, 78a Stanley Street, Glasgow, G41 1JH. DPA number ZA431921

Milton & Stirling Ltd are an Appointed Representative of MichaelAlan Ltd who are authorised & regulated by the Financial Conduct Authority, FRN 690939.

As part of our free service, we’ll review your financial situation, explain the available options and recommend a debt solution which is suitable for you. The risks of all suitable solutions will be explained clearly and if you decide to go ahead with a debt solution we will refer you to one of our trusted providers who specialise in the management of that debt solution. We’ll be paid for introducing you or for the preparatory work we do, depending on your debt solution fees may be payable if ongoing services are provided. Read about fees and key information in our terms & conditions. To find out more about managing your money and getting free debt advice, visit Money Advice Service , an independent service set up to help people manage their money.