Credit card is a small plastic card issued to users and allowed the users to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1.Besides that, unsecured consumer debt is an example of credit card debt, accessed through credit cards. Debt results when a customer of a credit card company purchases goods or service through the card system. When the customer does not pay on time for the company for amount of he or she has spent, debt can be increases and accumulates through interest and penalties. As a result, this debt will charge for a late payment penalty and report the late payment to credit rating agencies. Moreover, the late of payment sometimes referred to as “default” and the late payment penalty itself increases the amount of debt the consumer has.
Nowadays, credit card debts become serious problem. There are several causes of credit card debts will be discussed in the following:
1)Poor money management
Poor money management is one of the causes of credit card debts. It is because if credit card users purchase something without spending plan then will lead to overspend. Thus, it will rise and accumulated credit card debts.
2)Gambling
Gambling is a one of the entertainment and it can become addictive, so it will be hard to stop. Therefore, it will be lead to a financial disaster if borrowing money through credit card for gambling.
3)Unemployment
If people who are unemployment, it will lead to those people use credit card for their utilities, groceries and any expenses purpose to support the main breadwinner. Thus, it might lead to increase credit card debts.
4)Medical expenses
Credit card can be used if family member suffer serious illness. It might be health insurance can’t cover the medical bills. So it will lead to use credit card is one of the ways to settle the bills. Thus it will increase credit card debts.
This several causes of credit card debts will create a huge of credit card debts for user. So credit card user should take some ways to prevent credit card debts. There are some prevention credit card will be discussed in the following:
1)Limit what you use your credit cards for
Limit use credit card is a good ways to control your credit card debts. Do not always using your credit card to make daily purchases like groceries. If you prefer not carry cash around you can get yourself a debit card which works the same as a credit card, however, it is direct cash purchases. You are not charge often times to use these and you are using cash to make your purchases. Keeping your credit card debts under control is not easy for some people but we can all learn to avoid the many pitfalls that we all get used to falling into.
2)Always set up a budget
Before using credit card to purchase something, you must have make budget for yourself to estimate your spending. It will prevent you from overspending and fall under deeper debt load.
3)Keep your credit cards to a limited number
Try to keep your credit card as few as possible. It is because most of the people who have mounting credit card debts are having this problem because they have too many cards in the first place. If you want to have a card that you can use everywhere, try just having a Visa, MasterCard, or others card which are all used everywhere.
4)Avoid making any purchases during peak seasons
Try to prevent making any purchases with credit card during peak buying seasons such as Christmas and New Year. It is because they know that everyone is buying more items with their credit cards. So credit card companies will charge you more interest during these peak seasons. Most of these companies will not make a point to tell you this, but they make a mint off of us at these times.
References:
- http://en.wikipedia.org/wiki/Credit_card
- http://www.google.com.my/search?hl=en&q=credit+card&meta=&aq=f&oq
- http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp
- http://www.surfinthespirit.com/debt-consolidation/creditcarddebt.html
- http://www.creditcards.com/credit-card-news/5-steps-eliminate-credit-card-debt-1267.php
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