Credit Card Debts: Causes and Prevention

Credit Card Debts

Causes and Prevention

What is credit card? A credit card is a system of payment named after the small plastic card issued to users of the system. A credit card allows consumers to purchase products or services without cash and to pay for them at a later date. To qualify for this type of credit, the consumer must open an account with a bank or company, which sponsors a card.

If you have credit cards, but have not yet let your spending get out of hand, then now is the time to take stock of your position and make some decisions about your financial future. Ask yourself what do you want those credit cards for? Do you just want them so that you have a source of payment in emergencies, to shop occasionally online, or when you travel abroad? Or do you plan on going on a shopping spree and spending the rest of the year struggling to clear the balance? Most people do not intend to ever use up their credit limits and max out their credit cards, but it is surprisingly easy to do, and can be very difficult to undo.

Most of the 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. This is one of the major factor credit card debts cause.

Some of the credit card users don't know where they spend or spending without plan or budget. This is because they have credit cards with them so they can spend easily without thinking. When they come to pay the credit card debts, they will face difficulty to pay back and feel regret because they spend so much in the begining.

Prevention

Credit card users must manage their finance well. Try to set a budget for the monthly spending on credit card. Credit card users must know the interest rate charge by the credit card company. Don't always pay for the minimum payment only, try to pay all the balance in the credit card statements.

Next, credit card users have to pay the balance on time every month to avoid the credit card company charge high interest on the balance. Credit card users also must use the credit card like cash, not like a credit card. Always use credit card according to the budget that have set every month.

All of this will help credit card users to prevent from the credit card debts increase and get charge high interest on the balance.