Credit Card Debt

DEFINITION of 'Credit Card Debt'

A type of unsecured liability which is incurred through a short-term revolving loan facility. While, technically, all purchases made by credit card create a debt to the user, these debts typically do not incur interest until the grace period has expired. Thus, credit card users who pay off their balance each month are generally not considered to have credit card debt. Rather, the term applies to users who continue to carry a balance on their credit cards after the grace period has expired and the debt begins to bear interest.

BREAKING DOWN 'Credit Card Debt'

Although credit card debt is widespread, its high interest rates make it one of the worst types of debt. Credit card users who carry a balance do not have a grace period, so interest is charged on new purchases immediately. Credit cards often encourage users to pay only a small minimum payment, promoting the use of the card as a longer-term loan. However, many financial experts advise paying off all credit card debt as an early step to improving one's financial situation.

RELATED TERMS
  1. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  2. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  3. Credit Card Balance Transfer

    The transfer of all outstanding balances from one credit card ...
  4. Business Credit Card

    A credit card intended for use by a business rather than for ...
  5. Combined Guarantee

    A credit card agreement in which any debts accrued on the card ...
  6. Business Guarantee

    A credit card agreement in which any debts accrued on a corporate ...
Related Articles
  1. Credit & Loans

    Credit Cards: Choosing A Credit Card

    By Brigitte YuilleNo matter whether you're considering a credit card for the first time, or if you're a current credit card user looking for better rates, you'll need to figure out your spending ...
  2. Credit & Loans

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  3. Credit & Loans

    Credit And Debt Management: Credit Cards

    by Cathy ParetoCredit cards offer a convenient way to purchase things without the hassle of carrying cash. Used wisely, they're a great way to defer payment on purchases for roughly a month. ...
  4. Credit & Loans

    Which Credit Cards Are Best After Bankruptcy?

    Building back credit after bankruptcy generally starts with getting a secured credit card. Here's how to identify the best deals among the limited choices.
  5. Credit & Loans

    Credit Cards: Making Payments

    By Brigitte YuilleIt's a common goal that you share with other credit card holders: the desire to pay down a credit card balance. Most people know paying down the balance before the due date ...
  6. Mutual Funds & ETFs

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  7. Credit & Loans

    Credit Cards: Types Of Credit Cards

    By Brigitte YuilleCredit card products come in a wide assortment these days. Some credit card programs will ease their terms and conditions and offer perks for people with stellar credit, such ...
  8. Credit & Loans

    What Happens When Your Credit Card Expires

    You can take advantage of this process to learn about other cards that may better suit your needs.
  9. Credit & Loans

    Credit Card Or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  10. Credit & Loans

    Credit Cards: Pros And Cons

    By Brigitte YuilleThe ease in swiping a credit card for a purchase has its pros and cons. It may either help when handled properly or become a detriment. If you are able to pay your bills on ...
RELATED FAQS
  1. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
  2. Is it better to get a balance transfer or a personal loan to pay off my credit card ...

    Find out what you should consider before deciding to pay off your credit card debt by taking out a personal loan or using ... Read Answer >>
  3. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  4. Can I still use my credit cards if I'm on a debt management program?

    Learn how to find out if you can keep, use or apply for credit cards while on a debt management program and what kinds of ... Read Answer >>
  5. What are some common models that practitioners use in quantitative analysis of equity ...

    Understand which aspects of a credit card agreement make accepting a new credit card offer a good deal or one that should ... Read Answer >>
  6. How do I start building a credit score?

    Find out how to build a credit score, which type of credit score is best to start out with and what the most vital element ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center