Nowadays, you can buy whatever you want with just a swipe of the credit card. The introduction of credit cards has certainly made our lives easier when we need to make a payment. While credit cards are very easy to use, it may lead to credit card debt. In fact, one of the major causes of bankruptcies comes from credit card debts. The following are some of the factors that create credit card debts:
Causes of Credit Card Debts :
1. Poor money management
Poor money management is one of the major reasons why many families have accumulated credit card debts. This is because many people do not plan for their monthly expenses and did not record how much they have spent. Without properly keeping their bills and receipts, most people may not be aware of their credit card debts. Thus, leading to a rise in their credit card debts
2. Underemployment
Due to the economic crisis, many people lose their job and are unable to maintain their costs of living. This forces people to use credit cards to support their living expenses and maintain their current lifestyle, thinking it is only temporary. This may lead to a rise in debts when expenses are not reduced while the income had lessened.
3. Poor savings
People who have overspent using their credit card will have difficulty in saving as they need to pay off their debts. Saving is very important because it provides a cushion for financial strain. In case of emergency, the savings could be used to save us, compared to using credit cards which has high rates and increases our debts.
Prevention of Credit Card Debts :
1. Making a budget
First step is to plan a budget. It is important to do planning for our money, so we are aware where our money is spent on. Determining our monthly income and required expenses, allowing us to calculate how much surplus or shortage we have every month.
2. Self control and discipline
People who use credit cards should learn how to control their spending and have discipline so that they are not easily tempted to purchase any product they want. By setting a credit limit into the credit card, one can control their spending.
3. Choosing the right credit card
Make sure to have done survey when applying for credit card. Every credit card has their advantage and disadvantage. One should consider what their credit card are used for when applying for the credit card.
Truly, credit card debts have caused misery to many people. Credit card companies allow individuals to spend a lot more than how much they can actually afford to payback. Therefore, we should always control our spending when using credit card and make sure to save.
Here are some useful links for further information:
1. http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp - Top 10 causes of debt
2. http://www.cardratings.com/howtoavoidcreditcarddebt.html - How to avoid Credit Card Debt
By Lishi
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