The Credit Card Loop Explained & Potential Solutions


It is perfectly true that we are living in a world of credit and with so much aggressive marketing and a rising cost of living, it is very easy to fall behind with essential monthly repayments and find yourself receiving final demand notices and daily calls chasing up your account. In this article, we will examine the ‘credit card loop’ to help you gain a deeper understanding of the term.

The Beginning

It starts with the arrival of a credit card, which you might have applied for, or the company sent you promotional material offering credit card services. Once you have the card, which has a pre-agreed limit, you must exercise a level of restraint and if you use your card too much, when you have to make the payment at the end of the month, you have very little left on which to survive to the next pay cheque. This means you have to use the card to pay for everything until you receive the next month’s salary, and again, when you get paid, you pay off the card and once again, you have to use it until the end of the month.

Repeating Cycle

This is what is known as the credit card loop, and some people have several credit cards and they juggle the payments, always having to use the cards when they run out of cash, and it always leads to the same point; you can’t meet your monthly repayments and interest builds-up. The cycle of ‘use card-pay off card-use card-pay off card-use card’ could continue indefinitely, with the person racking up interest as they go.

Debt Consolidation Loan

This is the most popular way to clear mounting credit card debts, and with debt consolidation loans, all your credit cards are paid off by taking out a single loan, leaving you with only one manageable monthly payment. Even if you have a poor credit score, the online lender can usually facilitate a debt consolidation loan, and it only takes a Google search to find an online lender who has experience with all types of finance.

Once you have paid off your credit cards, you are advised to terminate the service, which will ensure that you never end up in the credit card loop again. If, on the other hand, you have the self-discipline to keep the card in your wallet for an emergency, this is a wise move, as you never know what the future might hold, and should you require quick cash, your credit card is the last resort.

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