Credit Card Debts: Causes and Prevention

Credit Card Debts

Credit card is defined as any card that may be used repeatedly to purchase product and services on credit which issued by banks and financial institutions. Credit cards provide us with the added security and ease when shopping and traveling but we tend to misuse them and may lead to credit card debt. When properly used, is an extremely convenient tool.

Credit card debts result from when a client of a credit card company purchased an item or services through the card they use. Debts accumulate increase with interest and penalties for late payment had made the total amount due become larger.

Credit card debt is said to be increasing in the industries areas. Sometime the late fees,over limit fees, high annual percentage rates, and universal default overcome customer who frequently do not pay off their debts, and the customer declares bankruptcy.

Causes of Credit Debts

1.Poor Credit Management
The money spent over the income earn on each month will create the debts. Prices of goods and services going up and not the income, more and more Malaysians are forced to spend beyond their earnings. Thus, they will use credit card to purchase goods and services and unable to pay back the expenses.Clearly knowing the expenses spending at which places is very important.

2.Lack of Concern
The real culprit behind the scenario is the desire to spend money. Lack of concern that their unable to meet the credit card payment obligation. They are lack of concern about payment obligation when they are using the credit card. Using credit card is that you will never feel like you are spending the real money, so self discipline is very important to avoid the debts incurred.

3.Partly Repaying the Credit Card Debts
Many credit card users only pay the interest and the minimum amount of principal when the debt is due, thus never fully repaying the entire sum. Debt accumulates and increases via interest and a penalty when the consumer does not make the payment.

4.Gambling
Many credit card users have the habit in gambling. When they loss the money, they never stop gambling but is continues doing it, then they will use the most easy way to get the money to let them continue to gamble, so credit card is their first choice to think about it.

5. No Saving
When the peoples are no saving, they can also be sucked into credit card debt by unemployment or emergency happened. So saving is very important to avoid this happening.




Prevention of Credit

1.Budget
Create a budget and stick to it. A clear budget that includes all of your monthly bills, food, entertainment and miscellaneous items will prevent you from spending thoughtlessly and buying on impulse.

2.Saving
Save for a rainy day. Direct a portion of your paycheck directly into your savings account so you never even see that money. Aim to save enough money to be able to pay your bills for 6 months in case you lose your job or have an accident.

3.Self discipline
Self control to overspending is the best way to avoid the credit card debts. Avoid using the credit card in always especially in shopping, because using credit card is that you will never feel like you are spending the real money.

4.Clear Financial Records and Regular Payment Schedule
Disorganization can cause you to overlook bills and overestimate how much you have to spend. Dedicate a specific time every month (just after payday is best) when you can sit down with your finances, pay your bills and determine how much you have to spend for the month ahead. So maintain clear financial records and a regular payment schedule is very important.

5. Shred or Tear Up Credit Card Applications
Shred or tear up credit card applications that come to you in the mail. Just because you get the application doesn't mean you need or want the card. Destroying the application will prevent you from using it and protect you from potential identity thieves.