Credit Card debts: Cause and Prevention

Do you like to use 'Future' money?

How well do you plan your budget?

Do you know many people declared bankrupt due to credit card debts?

Today's people like to purchase and pay by credit cards, as they are using the future money. Many people swipe without thinking, measuring the risk of being blacklisted and declared bankrupt for fail to pay their credit card debts. Many of them never realized the consequences from financial and non financial perspectives when they get a credit card. There are many factors for people incurred credit card debts, lets discuss the factors.

Causes of Credit Card Debts:

Unemployment
One of the major causes is unemployment - Many households use credit card to purchase groceries, utilities and other expenses purposes to maintain their lifestyle. When the credit card holder of the households has loss their job and remain unemployed during short periods, may cause the rise in credit card debts and cannot pay due to reduction in income. This happened especially during the economy crisis and companies start to lay off their employee.

Poor Money Management
This is one of the best reasons for today's households have accumulated a lot of credit card debs. It happened because people didn't planed well for their monthly spending and do not pay their bills in time. Many people never realized some of their spending are useless and unnecessary, this lead to a rise in debts by using credit cards.

Less or no savings
As we don't know what will happen tomorrow, we should have at least saving of 4-6 months living expenses. Nowadays, people tend to spend more than what they earned; so it is very hard for them to have savings. So if they loss their job or any unfortunate tragedy happens, they are unable to pay their credit card debts.

Solutions:

Budgeting
A prevention of incurred huge debt is budgeting, people should always make a clear budget and stick on it, such as monthly bills, food, clothes, entertainment and miscellaneous expenses. Make a budget can helps to prevent from overspending and fall under deeper debt load.

Deal with Creditors
Besides budgeting, we should communicate with creditors instantly when having trouble to pay off our debts to see whether they could give a revised payment arrangement. Running away from debts is not a responsible action and not a good solution. It the money collection from creditors is not fair, we may refer to Fair Debt Collection Practices Act to get solutions.

Self control and discipline
The best way to avoid huge debts is to have a direct set up, which we can settle the spending in full amount for each month and use in emergencies. We should spend on what we need rather than what we want, and do not overspend. The main prevention is to spend less in order to stay with well financial situation.



Referencing:
http://www.mmail.com.my/content/credit-card-debt-and-you-many-unaware-effects-bankruptcy
http://ecommercesite.wordpress.com/2008/06/25/credit-card-debts-causes-and-prevention/
http://www.3debtconsolidation.com/top10-causes.html