Credit Card debt

Credit card debt is a revolving source of borrowed money, usually paid for with relatively high interest rates. Based on a user's credit history, a credit limit and interest rate is established. Through purchases and cash withdrawals, the user borrows some or all of that available credit. Interest charges are added to the debt. The cardholder is billed monthly and may pay the debt back in increments ranging from a very low minimum payment up to the full amount. If any debt remains after each payment, interest is charged on the full amount in the next monthly billing. This can result in interest being charged on previous interest charges, which is known as compounded interest.

For some, this revolving debt is used merely as a convenient replacement for pocket cash. Purchases are made on a daily basis in person or online, and the card debt is paid in full at the end of every month. For others, it is a way to survive between paychecks. Their balance may rise or fall based on their current ability to pay.

The worse case scenario finds a credit card user opting to make minimum or partial payments each month. Their credit balance, or debt, grows steadily. If the credit limit is reached on a card, it can no longer be used for purchases. However, interest continues to be added to the debt and making the required monthly minimum payment may be the only way to avoid being sent to collection. The user is on the verge of adversely affecting their credit rating for years to come.

Some credit card users put off the inevitable a bit longer by practicing revolving charges, also known as kiting. One card's balance is paid with another credit card, which is in turn paid by another credit card. This practice cannot be sustained indefinitely. It may be considered fraud if the intent is to avoid paying the debts at all.

FHASecure

As Senate leaders continue to hash out a housing rescue proposal expected to reach a key committee vote later this week, officials in the Bush administration are touting the growing success of a Federal Housing Administration program launched last August. Called FHASecure, housing officials last week said that the product has helped 200,000 homeowners refinance their mortgages and avoid foreclosure.

“Over the past several months, FHA has been working to help families who want permanent relief from their high cost subprime mortgages,” said Deputy Secretary of Housing and Urban Development Roy Bernardi. “We are proud to have helped these struggling homeowners keep their homes.”

Applications for FHASecure loans are largely what has driven a huge spike in FHA application volume during the past three months, with numerous brokers reporting to Housing Wire that the FHA-led program is often the only resort many subprime borrowers have available to them when looking to refinance and avoid potential problems.