Saturday, February 14, 2009

Credit Card debts: Causes and Prevention

Nowadays it seems that credit cards are almost a necessity, rather than a luxury, which has caused many people to have a huge problem with credit card debt. Many people now have more than one credit card with a balance and you may even be one of those people. A credit card is exactly what the name implies. It is a card which you are able to use by borrowing on credit. You are borrowing money from the issuer every time you use it. Each time you use your credit card, you are increasing your debt.

1. Poor money management

A monthly spending plan is a useful tool for everyone. Without one, you have no idea where your money is going. You may be spending unnecessarily and end up having to charge purchases on which you should have spend that money. This will lead to a rise in your debt.

2. Underemployment

People who are experiencing under employment may continue to think of it as only temporary or if they are coming off unemployment feel a false sense of relief. They may start to spend on their credit card again. This will eventually increase their card debt.

3. Saving too little or not at all

If you have been preparing for unexpected expenditures by saving three to six months of living expenses, you will not have increased your debt caused by a job layoff, illness or divorce.

4. No money communication skills

Communicating with your spouse or significant other and your children about finances helps to reduce card debt. Many people find out that their spouse have racked up thousands dollars in credit card debt and they had no idea that the accounts even existed!

5. Financial illiteracy

Many people do not have an understanding how money works and grows, how to save and invest for a rainy day. Schools don't teach it, your parents may not have explained it. But, you are responsible for your life and your money anyway.

It’s time for you to think of a solution to avoid from credit card debts and be responsible to your life and money ^^

1. Setting a budget

Set up a budget and stick to it. You should be realistic about your expenses and your financial needs. You wouldn’t realize how a detailed monthly plan really helps to ease your financial situation.

2. Contacting and dealing with creditors

You may want to contact your credit card company and try to work out a payment plan. They would rater lower your interest or write it off altogether than not get any money from you at all.

3. Self control and discipline

If your spending habits are not controlled, this will cause debt to increase even faster. What started off as a small balance will rapidly becomes a large amount that can seem impossible to pay off. Hence, it is essential that you have self control over your spending.

One should have self-awareness of the causes of credit card debts and spend wisely ^^

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