Credit Card Debts : Causes and Prevention

From my personal knowledge of the credit card, it serves as if it was money and it would accumulate total money spent as debt when a client purchases an item or service by using this card. Debt increases as a result of interest and penalties are accumulated when the client does not pay the company the debt on time or dragging the payment. However, credit card was said to have bad operating system as it does not add interest to the respective debt precisely especially those late payment. In other words, it could be considered as a low-secured alternative of money.

Now I would like to share with you all about the causes and prevention for the credit card debts.

Causes:

Poor money management. A monthly financial plan is essential. Without it you have no idea where your money goes. You may be spending money unnecessarily and excessively each month and end up with bearing of heavy debt where interest is added in. Planning is not difficult as it involves reconciliation of your expenditure made and planned expenditure by taking your income into the planning. Gambling could be addictive, hard to stop and loans are easily available. Gambling is subject to high uncertainty and it might cause you to use credit card to solve your debt when being pressured by creditors. Saving too little or not at all, the simplest way to avoid unwanted debt is preparing for unexpected expenditures by saving money to support three to six months of living expenses. With a savings cushion in place, a job layoff, illness or divorce will not cause immediate financial strain and increase debt. You always hear, "Pay yourself first." Do it and it will grow and be there when you need it. No one has ever regretted having a savings cushion. No communication of financial matters. It is important to communicate with your spouse or significant people and your children about financial matters. Keep the communication going on and discuss financial goals and spending styles with them Financial Illiteracy. Many people don't understand how money works and grows, how to save and invest for a rainy day, or even why they should balance their checkbook. The schools don't teach it, your parents may not have sat you down and explained it. It doesn't matter. You are responsible for your life and your money anyway. Financial mistakes are increasingly expensive and complicated to resolve. Get educated and get in control.

Prevention of the credit card debt:

Photocopy the credit card offer, including the interest rate and terms. Create a letter to your credit card companies stating that you are thinking of switching to their competition because they are offering a far more reasonable interest rate. Credit card companies do not want to lose your business. Nine times out of ten they will match or even offer a lower rate than the competition has offered. If you can afford it, pay doubles the minimum payment. The minimum payment usually pays just enough to cover the interest and a little more that pays down the balance. Paying extra will pay your balance more quickly. Pay off smaller balances first. It is common for a person to try to focus on their cards with larger balances first. Pay off the smaller ones. It will take less time and you will feel a sense of satisfaction when you have actually completed your goal. This will boost your confidence and make it easier to tackle the higher balances. If you have equity in your home, look into paying off credit card debt with a refinance or fixed-rate home equity loan. Do not use a home equity line of credit, the rates will rise as the prime rises and suddenly you may find it impossible to keep up with your bills.