Credit card debts : Causes and Preventions

CREDIT CARD DEBT

Credit card debt: Causes and Prevention

Firstly, credit card has been used as a necessity among undergraduates, children, family member and many others for the purpose of buying things on credits as it is ease to use. There are many other reasons that cause credit card debts. The causes are as follows:

· Low income, high expenses

It happens when the main wage earner of the household loses his job in economic downturn where many retrenchment are carried out but monthly expenses are not cut down in line with the reduction in income. This obviously leads to a rise in debt. Thus, the family is forced to use their credit cards for groceries, utilities, and others as a ways to cope their financial difficulties.

· Poor money management

Poor money management is one of the top reasons why so many families accumulate lots of debt. Not having a monthly spending plan and not keeping track of your monthly bills makes you unaware of where your money is going. While your money is going towards purchasing useless items, you might also be charging your necessary purchases on your credit card, forcing you to pay interest on these purchases every month.

· Non financial communication

Communicate your current financial health with your spouse and your children and make them aware that if you cannot afford a certain item, they should not ask for it. For example, if your 16 year old son wants a new nice hot sports car, communicate to him that you cannot afford it. Instead, he should go for a smaller car that gets him from option A to B.

· Financial ignorance

This is the upmost key consideration such as saving and investing your personal finances are not taught in school. It's on you to learn to save for a rainy day, as well as manage your money so you can own a house over the longer term. Without this knowledge, you might just use your credit card without knowing your financial strength and limitation.

· Perception

For an illustration, many people hope to win the lottery but the chances of that happening are less than 1%. Thus, it means that we shouldn't spend tomorrow's saved money today just because you expect a promotion in your job or are expecting some miracle to happen. Mostly, perception to gain something without hard work will most likely go wrong more easily than going right.

The causes of credit card debts are as above but there are still many other causes. On the other hand, the following are some of the prevention methods to overcome credit card debts:

· Get rid of credit card

The first and hardest thing you need to do is get rid of your credit cards. In our society this may seem to be an impossible requirement. It’s not. People have lots of excuses for not doing it. These include the assertion that no one wants to accept checks anymore, or that they have to have a credit card to take advantage of online shopping opportunities. These sound plausible, but there are perfectly workable answers and for all of these “problems.”

· Get a debit card

The most obvious solution is to get a debit card. Modern debit cards will work in any machine that accepts credit cards, and they are accepted for online shopping as well. Naturally, if you are using a debit card you cannot spend more money than you have, but that’s why they are a superb tool when you’re trying to get rid of credit card debt.

· Set a budget cash flows from credit counseling centre

Get help from a consumer credit counseling centre where they help you work out different payment options for your credit cards where they will set up a budget and you must stick to it. Most importantly is to be realistic about your expenses and your financial needs, and then draw up a detailed monthly plan to allow yourself review your actual expenses with the budgeted expenses.

Finally, preventing from credit card debt will be the best way as compared to overcome credit card debts. There are many others prevention methods which are all depend on our action taken.