Friday, February 13, 2009

Credit Card debts: Causes and Prevention

Credit card can be considered as plastic money which replaces the hazards of cash in making payments and purchasing transactions. Having this advantage, credit cards are now being misused by the consumers, and even causing bankruptcies.
Unfortunately, a lots of people misuse the credit cards by buying costly foods and grocery purchasing habits. This is where credit card arises where debt accumulates via interest and penalties. There are many reasons that cause credit card debts.

1. Poor money management
People also always do not know where their money is spending or keep on spending without plan or budget. They usually spent on unnecessary things and when there is a need of purchasing a required commodity people may short of cash and use a credit card frequently ending up in debt. That may cause the increasing of credit card debt.

2. Free application
Nowadays, credit card no longer holds by the rich or higher income status. The most attractive are free for application and excluded any annual fees and even free for life. It causes more people now are able to hold a credit card, such as students, operators or fresh graduates.

3. Gambling
Many people put not only their own disposable income on the line when gambling, they also borrow loans to gamble. How many come back home with a bag full of cash, very few. The guarantee in this game of chance is that will be definitely paying to the house. Gambling loans are also available which lead to debt. This addictive and very hard to stop game can take away everything people owe.

4. Unemployment
Households are forced to use credit card for groceries, utilities and some expenses purposes to maintain current lifestyle when the main breadwinner of the household has loss his job and could not find a new job during short periods. This may lead to a rise in debt when expenses are not cut down in line with the reduction in income.

Ways to Prevent:
1. For the card holders who always loss of financial control after using credit card, they should get a related education or concept regarding financial control and wisely plan their monthly budgets for expenses. Alternatively, they can also seek for financial consultation to solve their credit card debts problem.

2. As a smart consumer, we should consider twice before applying for a credit card. Is that a need to apply or just blindly follow the trend? Especially those fresh graduates, they should weight their ability for repaying debts on a credit card.

3. The solution is only advise people don’t go to gambling or develop themselves in the health hobbies.

4. The prevention in to decrease the expenses and down the road increase the income by extra hours work or a better job. Adopt debt consolidation, counseling, debt management, debt settlement or any other method and limit the use of credit cards to emergencies only if they actually want to live a debt free life.

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