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

    A card issued by a financial company giving the holder an option ...
  2. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  3. Business Credit Card

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

    A credit card agreement in which any debts accrued on the card ...
  5. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  6. Business Guarantee

    A credit card agreement in which any debts accrued on a corporate ...
Related Articles
  1. Personal Finance

    Expert Tips for Cutting Credit Card Debt

    Managing your debt could mean the difference between spending $45,000 or saving $184,000.
  2. Personal Finance

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  3. Personal Finance

    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.
  4. Personal Finance

    How to Pay Off Credit Card Debt This Year

    When you look at the numbers, debt seems to have become an American way of life.
  5. Personal Finance

    Credit Card Debt: America’s Biggest Struggle?

    Dealing with credit card debt is a huge struggle for many American families. Here are some tips to get you started.
  6. Personal Finance

    3 New Types Of Credit Cards To Look For

    These three types of credit cards are becoming popular with customers looking to pay less fees and build up their credit scores.
  7. Personal Finance

    Get A Free Ride From Credit Companies

    Find out how to make your credit cards work for you - not against you.
  8. Personal Finance

    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.
Trading Center