Credit card is a system which named after a small piece of plastic card issued to its users. Users lend money and to be paid later to the particular bank merchant. The system allows users to revolve their balance at the cost of having interest charged for late payments. The cards are in the same shape and size which are specified by the ISO 7810 standard that means they are easy to bring along everyday.
As we all know credit cards provide us benefits such as convenient and attraction of the intense competition in the credit card market. Those banks and financial institutions usually provide offer incentives like frequent flyer points, gifts certificates or cash back to attract customers to signup their credit card offers.
On the other hand, many credit card holders are filed for bankruptcies each year. This happened because subscribers do not realize of its consequences when signing up without understanding the terms and conditions of subscribing them. Subscribers often pay only the interest and the minimum amount when debts are due, this allows their debts to accumulate each month and being charged for a higher interest.
The followings are causes of credit card debts.
1. Poor Money Management
This is one of the best reasons why so many individuals accumulate so many debts. Occurs when they do not have a monthly spending plan and do not practice how to keep track on their monthly bills which makes them unaware of where their money is going. They might spend on something which is useless or invaluable in their life, yet they do not realize it. This unwanted purchase might also be charging through your credit card and at the end forcing you to pay interest on the purchase every month.
2. Unemployment
Individuals are forced to use credit cards for their own convenient to maintain their current lifestyles. During the unemployment period, individuals especially the main breadwinners of a household are in need of income to raise their family members. If those expenses are unable to reduce which means this may lead to a larger potion debt.
3. Gambling
As today, gambling is a common activity for most of the individuals. If individuals are addicted to gambling, then it is hard to stop them. For gamblers’ convenient, gambling organizations set up website for their loyal customers. It will lead them to financial disaster if they gamble using their credit services
4. Financial Illiteracy
Individuals do not really understand how money works and grow, how to safe and invest for rainy days and reasons of balancing their checkbook. You are what you have in your accounts and you are responsible for it. If there is a habit of spending wisely in you, you are lucky. Financial mistakes are expensive so be educated and get in control of your expenses. Topics like saving and investing your personal finances are not taught in school. So it is on you to wisely save them so rainy days.
5. No Financial Communication Skills
Communicate with your wife and a child about finances matter is important. Often communicate and discuss financial issues and spending behaviors. It is wise to outline your strategies for you to spend and save at the same time. Family members should be honest about their expenses. In the US, many couples divorce because one of them is rack up thousands of dollars in credit card debt. Moreover, some of them did not even know the credit card account was existed!
However, there are many ways to avoid those debts if we know how to prevent them.
1. Budget
Practice to draft out a budget every month. It is important to manage your money before it dries up. If you able to follow the plans without spending over the budget, then u might no have to rely on your credit cards anymore.
2. Control
Control ourselves from using credit cards unless they are necessary. A wise holder will only use them from emergency and so on. There are no penalties so not using yours cards.
3. Low interest rate
Get a low interest rate cards to reduce your burden someday. Each month’s unpaid balance will be charge according the rates.
4. Remember pay on time
Your credit cards’ statements will usually arrive days before the due date. So remember to clear of your debts. If you are unable to pay back the whole sum, then try to pay back as much as possible, or else your debts will keep on grow each month.
5. Awareness
Be aware of the consequences of not able to repay your debts. You maybe declared as a bankruptcy or lose everything to the creditors. Educate the young generation. Teach them the ways to manage their own finances for a greater future.
In conclusion, the cards should be used for emergencies only, unless you plan to pay up the entire balance immediately.
http://www.3debtconsolidation.com/top10-causes.html
http://ezinearticles.com/?Credit-Card-Debt---Prevention-Is-Better-Than-Cure&id=226244
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