Caught In The Minimum Payment Trap

Hi,
The last two blogs set the table for how one can get caught making minimum payments on credit cards. Today I am writing about being caught in the trap. After the cardholder receives an additional credit card he or she gets some instant gratification from being able to cover monthly expenses. Thirty days later two credit card bills arrive and once again, due to lack of cash, only the minimum payments are made. Before long, the card holder has maxed out the second credit card. In many instances this scenario will continue over a one to two year period resulting in the individual maxing out seven to ten bank cards to the tune of $40,000-$50,000. The last resort that some borrowers choose is to transfer the balances from existing maxed out cards to new cards. This is a perfect example of "robbing Peter to pay Paul". Once the borrower has exhausted all means of generating cash from credit cards, he or she might resort to tapping into his or her home equity. By the time the borrower applies for a home equity loan, the borrower's credit score has declined considerably and he or she will only be able to borrow on a non-conventional high interest mortgage. The result of the home equity loan is that the borrower has access to cash covering expenses for a few months, but without substantial income, falls behind and soon finds himself or herself in financial chaos. This scenario has unfolded around the country on numerous occasions over the past thirty years. I have written the last three blogs for the purpose of letting new credit card holders some of the pitfalls of using credit cards.
Have a good weekend!
Alan