Credit Card debts: Causes ad Prevention

First, I going to explain what is credit card then after that i will explain credit card debt. Credit card is card entitling its holder to buy goods and services based on the holders promise to pay for these goods and services.

Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards. Debt result when a client of credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent. The result of not paying the debt on time are that the company will charge a late payment penalty and report the late payment to credit rating agencies. The late payment penalty itself increases the amount of debt the consumer has.

The causes of credit card debts are:
1. Less Income, More Expenses
It so happens that the main breadwinner of the household loses his job but monthly expenses are not cut down in line with the reduction in income. This obviously leads to a rise in debt. The family is forced to use their credit cards for groceries, utilities and etc.

2. Divorce
Fees for the divorce attorney, division of assets between you and your spouse, proceeds given to children are an easy way to rack up a huge debt. Filling for a divorce may force you to quit working for sometime which leads to reduction in income.

3. Poor Money Management
Poor money management is one of the best reasons why so many families accumulate lots of debt. Not having a monthly spending plan and not keeping track of your monthly bills makes you unaware of where your money is going. You might be spending hundreds of dollars every month towards items that are useless and have no value in your life, yet you do not realize it. While your money is going towards purchasing useless items, you might also be charging your necessary purchases on your credit card, forcing you to pay interest on these purchases every month.

4. Hoping to win the lottery
Most people hope to win the lottery but the chances of that happening are 0%. Do not spend tomorrow's saved money today just because you expect a promotion in your job or are expecting an inheritance from a decreased grandfather. We all know like is unfair and things can go wrong more easily than going right

5. Underemployment
If you are underemployed meaning you are not getting enough working hours at your job, you should also cut down on your lifestyle to match your current income. Forget about driving a BMW if ou are working only 30 hours a work a week. However, if you are a Financial Controller with a local corporation, then you should think about driving a BMW.

Now, i going to discuss the prevention for the credit card debt. Everyone can apply for credit card but you must know whether you can afford to pay the amount during the bills out.

1. Keep your credit card spending amount that you can pay off and don't go over board with unnecessary purchases. Other than that, you have to plan the budget you going to pay back.

2. If you don't want to have many credit card debt, you can cut out some credit card that you seldom use and left a credit card that has lowest interest rate. Although you have left one credit card, you also cannot keep on purchase items using credit card The credit card is just use when you have emergency thing happen.

3. Other than that, you have to avoid using credit card buying the expensive thing but if the items is necessary then just use it. The most important thing is think nicely before you buy the thing.

References Link:
1. http://ezinearticles.com/?Credit-Card-Debt---Prevention-Is-Better-Than-Cure&id=226244
2. http://en.wikipedia.org/wiki/Credit_card_debt

~prepare by Wendy Lee~