Credit Card Debts: Causes and Prevention

Credit card allows consumers to purchase items and services without using cash. When the consumers use their credit card, their credit card issuer will pay the merchant on their behalf and bill to consumers later in the form of a monthly statement.

 Credit card debt is the example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards. The debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money that they have spent. When consumer does not pay the debt on time, the company will charge a late payment penalty and report the late payment to credit rating agencies. The late payment sometimes referred to as being in default.

Causes of Credit Card Debts

Less Income and More Expenses.

It happens that the main bread-winner of the household loses their job but at the same time they do not cut down their monthly expenses with the reduction in income. So, the family is forced to use their credit cards for general household goods.

Poor Money Management.

The poor money management is the best reasons why so many families accumulate lots of debt. The consumers do not have a monthly spending plan and they are not keeping track of their monthly bills. This makes consumers unaware of where their money goes. While consumer’s money goes towards items that are useless, they might be charged on their necessary purchases on their credit card, this indirectly force consumers to pay interest on these purchases every month.

Hoping to win in the lottery

Most of the people hope to win lottery but the chances of that happening are 0%.

Consumers are advised not to spend tomorrows saved money today just because consumers expect a promotion in their job or expecting heritage from a decreased grandfather.

Big medical expenses

The cost of obtaining cures and medicine is increasing every year. Most of the doctors accept credit cards because when the consumers need treatment now, consumers usually do not have the cash. Consumers use their credit cards because they do not have enough savings in the bank.

 

Underemployment

When consumers are underemployed, its means that consumers are not getting enough working hours at their job, consumers should cut down their lifestyle to match their current income.

Prevention of Credit Card Debts

Eating out

It is not necessary that the consumers have to go out to have their dinner. It’s much cheaper if the consumers cook at home. Besides that, the consumers can also get some recipes from books or newspaper and try to cook it at home. 

Recreational shopping

For many people, shopping is not just about buying things. It’s a social activity and is a form of entertainment. If the consumers wanted to get out of the debts, the consumers must change their attitude towards shopping. The consumers are advised to go shopping less unless they plan to buy something specific.

Smoking

Smoking is even worse for consumers than junk food. Smoking is more expensive. The consumers have to use their new thrifty lifestyle as a reason to kick the habit.

Designer clothes

When the consumers have credit card debt, the consumers will have to learn how to live without those expensive labels. Designer clothes are by their very definition items of luxury. When the consumers are in debt, they cannot afford luxury.

Late fees

The best way to avoid late fees is try to remember to pay the bills on time. There are 2 ways to help the consumers to avoid the extortionate penalties and at the same time the consumers can improve their credit score. When consumers have better credit score, the consumers can borrow money at a lower interest rate.