Credit Card Debts: Causes and Prevention

Do you know what is a Credit Card? A Credit Card is a method of payment that uses a small plastic card issued to consumers for making purchases. Credit cards may provide extra financial freedom but it will lead to a huge debt if consumers do not use credit card wisely.

Let’s look at some of the causes.

1. Poor Money Management
A monthly spending plan is essential, so that we know where our money is going. Sometimes, we may be spending hundreds of dollars unnecessarily each month and end up with extra charges on unneeded purchases. However, we will make more thoughtful decisions if there is good money management.

2. Expenses more than Income
Very often, we do not cut down monthly expenses in line with a decline in income for some reason and allow debt to fill the gap. Therefore consumers are compelled to use credit cards in buying stuff. The simplest way to avoid unwanted debt is to prepare for unexpected expenditures or emergencies by saving at least a recommended 4-6 months of living expenses.

3. Underemployment
People experiencing underemployment (getting less working hours at jobs) will be having lesser income. They may think of the situation as only for a short period but it is a false sense of relief. They should live a lifestyle that match their current income. Otherwise, debts will build up unknowingly.

4. Medical Expenses
The medical industry wants to get paid at the time service is rendered. The cost of obtaining cures and medicine is increasing if compared to previous year. Every doctor now accepts Credit Card because the doctor wants to get money instantly. We should think twice before using the Credit Card.

5. No money communication skills
Communication with family about the financial situation is important. Keep the lines of communication open and discuss financial goals and spending styles.

Here are some preventive measures.

1. Pay in full and on time
As consumers, we should always keep track of our credit card spending. Take self control and discipline to keep these cards in your wallet and not overspend on them. Make the payment as soon as possible to avoid paying interest charges to the bank, or at least try to make the minimum payment.

2. Avoid extra expenses
Prevention really is better than cure. One of the best habits is cut down on all unnecessary expenses. Wise judgments should be made before spending. There are some things we can actually avoid in buying.

3. Education
Financial courses important to educate people on how to plan their savings and spending. They are less likely to fall into credit card debts as an adult.

4. Limit the Plastics
Different credit cards have their own terms and conditions like interest rates and grace periods. Keep only one or two cards so that you can remember easily which one has the lowest and highest interest rates and not forget to pay on time.

Although credit cards bring convenience to people but it should be used with great care and caution and spend in accordance with own ability.

References:
http://www.3debtconsolidation.com/top10-causes.html

http://www.cardratings.com/howtoavoidcreditcarddebt.html