Credit card debt: Causes and Prevention

Nowadays, credit card is playing an important role in people life especially to those who live in the city. With the flexibility and convenient provide by the credit card, it seems to be very common to use in our daily expense. For those people who owning a credit card, he or she must be very careful by spending with credit card and must be able to pay off the balance each month. As we know that many individuals are owe too much debt and the increase of the bankruptcy risk is due to the over-used of credit card.

The causes of people go into Credit card debts are:-


1. low income but high expenses
This is most probably happens on household. If the monthly expenditures are more than income, then the family was forced to use their credit cards for utility and groceries expenses. This obviously led to increase on debt.


2. Saving little
Nowadays, youngest generations are least saving their money in bank. They spend almost 80% of their salary on clothing, food and beverage, car and electronic product. With the lack of the saving, sometime people will don’t have the enough money and liquidity of cash to purchase things. It will cause them to relay and pay by credit card. Finally they will over-use of credit card and fall into credit card debt.


3. Poor money management
Financial planning such as monthly expenditure budget is very important to guide us become a rational consumer and keep away from having more debt. But unluckily, most of the people spend whatever they have earned or by credit card without planning. People are also lack of knowledge in manage their income and allocate their spending that finally lead them having a burden of credit card debt.
4. Gamble
Many people put on their disposable income on gambling. Some of them are borrow money or used credit card to gamble. As you can see, there is a huge of people in the Casino everyday. They try to put their money on their luck. It’s take high risk. Once they lose their money in the casino, it will cause financial problem. That’s why a lot of people go into credit cards debt.

5. Social pressure
Nowadays many people around us are wearing or using branded thing, it will more or less giving us some pressures. With this pressure, we will try and try to follow other people for having branded things. But with the limited salary that we earned, we will finally relay and using credit card to purchase the expensive branded goods. This will also over-use the credit card and increase our debt.

6. Spend based on your interest, preferences or emotion.
Some of the people will spend the money based on their interest or preferences; they don’t care about the price. Besides, some of the people will spend money based on their mood. For example, when they are upset they will try to let off by buying things without think of how much they need to pay for those things. It is irrational behavior.



To work your way to debt-free living, prevent for the credit card debt need to be treated serious. By taking control of your finances, you are taking control of your life, and making it better than ever. So, to make life easy and lesser burden, here are some ways and steps that can prevent for falling into credit card debt:-

1. Establish a monthly spending budget and then follow that budget exactly. - This mean that we can only spend by using credit card for the certain transaction payment and with the amount payment that already include in our monthly spending budget. So, we cannot simply think or tempted to buy a LCD TV by using credit card which doesn’t include in the budget.

2. Carry or owe a credit card balance for not more than six months. - This is because the compounding of simple interest will produce a very expensive balance to pay it off if the balances owned more than 6 month.

3. Pay double the minimum payment – If you can afford, try to pay double the minimum payment. It is because the minimum payment normally just enough to cover the interest and little of the principal debt balance. Paying extra will settle the debt more quickly.

4. Own a low interest credit card if your credit card’s interest rate is excessive – Banks credit cards are very competitive among each other. Different bank will promote different kind of plans or strategies to encourage people to spending with their bank’s credit card. If we are currently holding an excessive interest rate credit card, rationally we should replace it by using another bank’s credit card that which have a low interest.

5. Cut up with other additional credit card and holding one card for emergencies– By holding more than one credit card, it will make u always tempted to spend especially some luxury things and something that not necessary. To control the debt, we should cut up with additional cards that seldom use and if possible just remain one credit card for normal spending and emergencies.
In conclusion, spent smart, spent wisely to make life easy.


For more information, please click below:
http://www.mozdex.com/prevent-credit-card-debt/
http://www.creditcards.com/credit-card-news/5-simple-credit-card-debt-rules-1267.php
http://www.moneyinstructor.com/creditcards.asp