*EC~4~US*: Credit Card Debts: Causes And Prevention

Credit cards become more and more common nowadays. Most of the people who are working hold at least one credit card. Credit card is a card that may be used to borrow money or buy products and services on credit. It is issued by banks, savings and loans, retail stores, and other businesses. Credit cards could be very useful when buying things and especially during emergencies. However, some people didn't use credit cards wisely and causes debts to accumulate because of the amount of money that they are owing, interest and penalties.

These are some of the causes of credit card debts:

i)Spending Without Control

Most people think that using credit cards to buy things is convenient as they don't need to bring a lot of money when they go out. Usually the limit for credit cards is up to a few thousands, so they use the credit cards to buy things without thinking of the budget. They just need to swipe their credit cards at the machine and they can buy the things that they want to buy. So, when people spending using credit cards will tend to spend without control. When they are not able to pay back the money that they have spent using credit cards at the end of the month, they will be charged on interest and penalties and consequently their debts will be accumulated.

ii)Saving Too Few or Don't Have Saving At All

Nowadays, people don't like to save their money. Instead, they rather spend away all their monthly salaries. By the end of the month, they don't have enough money to pay for the credit card debts and the debts will keep on increasing due to interest charge and penalties Those who have savings may also face the problem of credit card debts. This is because their savings might be too few and not enough to cover their credit card debts. Their debts will keep on increasing too but not as much as and as fast as those who don't have savings.

iii)Reduced Income And Increasing Expenses

Due to the recession period of economy, the income of most people has been reduced or maintained. However, their expenses have been increasing all the time. This is mostly due to the inflation. Most goods have been increased in prices. People have lesser money to spend on their expenses. So, they don't even have extra money to pay for the credit card payments. Hence, their debts are increasing because of this reason.

iv)Unemployment

As mentioned above, during this economic recession period, most people can't get a high income, some even have been sacked or fired because the companies need to save costs. This will increase the number of unemployed and unemployment rate in the country. Since the people don't even have a work to earn money, so they can't pay for their credit card debts and the debts will accumulate.

To prevent credit card debts, you should:

i)Plan Your Budget

Planning a budget before you spend is very important. This will avoid you from spending without control. You should plan your budget wisely. Try to spend your expenses at the lowest costs. Try to make comparison before you buy a product, choose the one with the lowest price. Make a list which stated all the things that you want to buy before you start buying things. If possible, try to avoid using credit cards to pay for your purchases.

ii)Pay The Balance In Full

You should try to pay the balance in full every month. Try to pay more than the minimum payment that the creditors charge you every month. This will help you to clear your debts faster and also reduce the interest charged on you every month.

iii)Having The Habit Of Saving Money

You should save a certain amount of money every month from your salaries. The savings not just can be used to clear your credit card debts, they also can be used for emergencies. Furthermore, when you have more savings, you will avoid to rely on the credit cards when you spend as you can use the savings to pay for your spending.

iv)Pay On Time

You should pay all your credit card payments on time every month. This is to avoid your creditors to charge penalties on you because of your late payments. Those penalties can cause the credit card debts to increase. Besides that, because of the universal default clause in the credit cards' terms and conditions, credit card companies can increase your interest rate if you pay your creditors late. If you're pay before the due date, you will save money on interest because the interest is calculated based on the average daily balance.

v)Limit The Number Of Credit Cards That You Hold

Try to limit the number of credit cards that you hold to one or two. Each credit card has different terms and conditions like interest rates, penalties and due date. Try to use the credit cards with lower interest rates. By limiting the number of credit cards to just one or two will allow you to track your credit card payments easily. The amount of debts will also not as high as holding more than two credit cards.