Credit Card debts : Causes and Prevention

Now days it seems that credit cards are almost a necessity, rather than a luxury, which has caused many people to have a huge problem with credit card debt. Many people now have more than one credit card with a balance and you may even be one of those people. If you are one of the millions of people wanting to get out of credit card debt, then you first need to understand what caused the credit card debt problem to begin with.

Causes Of Credit Card Debts :

=> Spending money before you have it

Nothing in life is certain. Do not spend money that are expecting to get in the near future, but that you do not have currently. Whether it is an expected yearly bonus, a birthday present, an inheritance, or anything else, wait until you have the money in your account before you spend it. Or, better yet, save it!

=> Gambling

While this might not seen like as serious or common a cause of debt as the other reasons listed, gambling actually does contribute to a great deal of individuals’ debt problem.

=> Not understanding money

Even with the best of intentions, one can find him- or herself in debt simply by not being educated about finances. Without understanding how money works for you and against you, how it grows and how to use credit to your advantage, you may find yourself in a bad financial situation.

=> Failed business

It is an unfortunate fact that many start-up businesses fail, and when they do the results can be financially devastating for the business owner. Particularly for small businesses, business owners sometimes become personally liable for debts incurred on behalf of their businesses.

=> Not saving

Well now, this should come as no surprise! Saving even a minimal amount each month will allow you to build up an account that can help to protect against any unexpected costs, or against a loss of income, in the future. Remember the saying “pay yourself first”.

=> Relying on your credit cards

Credit cards should be valued for their convenience, but you should not be using them as extra income. If you are putting purchases on credit cards just to make ends meet, then you may be on the verge of serious debt trouble. If you do not have enough money to pay for something in cash, then you really do not have enough to pay for it via credit card either.

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.

Prevention Of Credit Card Debts :

=> Photocopy the credit card offer, including the interest rate and terms

Create a letter to your credit card company/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.

=> Pay double 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.

=> Cut up your cards

So that you are not tempted to use them. Save one card for emergencies.

=> Pay off credit card with a refinance home equity loan

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.