When you don’t make quite enough to cover all of your expenses out of pocket each month, credit cards are invaluable. They help you cover expenses until you have another paycheck in the bank. People tend to lean on them even more during the holidays to cover gifts, travel and entertainment expenses.
Unfortunately, that can mean that your balance creeps up a little bit each month. Even if you are diligent about making payments, if you can’t pay the balance off each month, your credit cards could eventually destabilize your budget and financial health.
Credit cards trap many people in a painful cycle
If you only carry a balance of $100 at first, it probably doesn’t seem like something worth worrying about. However, $100 a month above your budget to pay it off means over $1,000 in debt at the end of the year. When you factor in interest and the possibility of over-limit or late payment fees, that $100 each month might build up to thousands of dollars of debt that you simply can’t repay.
Once you have more credit card debt than you can pay off, you will have to get creative about covering necessary bills like car payments. You might open a second card. You might try transferring a balance. Some people even use personal loans taken out against their vehicles or home equity loans to pay off their credit card, only to immediately develop a balance again.
If you know that you aren’t in a position to repay your credit card debt and your obligations have begun to impact your ability to cover your basic cost of living expenses, filing for personal bankruptcy can be a way to break free of the cycle of credit card debt and regain control over your money.