Credit Card debts: Causes and Prevention

I’m sure everyone out there know what is credit card. Everyone wishes to own a credit card or more in their hand. Basically, a credit card is a way of payment by using a plastic card. It is issued to the customers to make their payment after a credit card application has been made and approved by authorities. Then the issuer will lend out the money to the credit card holder. After that, the customer can start to buy their lovely things at any outlets on credit up to the limit of credit.

Customers can also use credit cards to enjoy credit card online facilities. It is easy to use, faster than actual procedures of cash transactions and convenient. Examples of online websites that provide credit card payment method are Amazon, eBay, AirAsia and etc. In addition, customers can earn points by using the credit cards for exchanging rewards.

Causes of credit card debts:

• Excessive spending: One of the most common causes and it happened to everyone who owned the credit card. Consumers tend to buy everything with credit cards whether it is necessary or unnecessary needs. This is because they do not have to carry so much money in their pocket. Moreover, consumers can buy expensive things immediately such as mp3 player, plasma television, computer, online songs and etc.

• Do not save funds into savings account: Most of the consumers do not save funds into their savings account and this will cause the consumers to use their credit cards whenever they like including emergency expenses. Unexpectedly, consumers are using the credit cards to pay for all the transactions and increase credit card debts.

• Late payment for monthly credit card bills: Another common cause that happened to credit card holders. Some consumers use credit cards as their payment method for every transaction but they may sometimes forget that the items they purchased are on credit. When the credit card bills arrived, they will have problems to pay for the debts. If the credit card holders are unable to pay the debts on time, interest will be charged due to the late payment.

• Pay medical expenses: Unexpected events may happen in our life and unable to predict. Some credit card holders will use their credit cards to pay for medical bills instead of using cash. Medical costs is high and will increase credit card debts.

• Too much relying on credit cards : It is ease to use and carry credit cards anywhere, anytime. Unfortunately, some consumers think that they have much money to shop by using their credit cards and often using it. It will make the consumers to spend more than their monthly income. This will lead to credit card debts and slowly become a habit to use credit card to make payment.

• Loss of employment: Thousands of people will become unemployed each day and will have difficulty in managing money because unable to find a secure job, especially credit card holders are in credit card debts. They will have difficulties to pay for the debts as they need to spend on montly expenses too.
  

Preventions for credit card debts:

• Create a new budget. Determine how much money you would have for a month and what necessary needs that need to purchase. The most important is to cut out the unnecessary expenses.

• Regularly contribute funds into savings account. Even with the little funds you still can put into savings account and slowly you will have much money to pay for the debts or for emergency use.

• Keep a calendar with you whether it is a hard copy or electronic. This is an effective way that can ensure you never late for paying credit card bills each month.

• Make a list of items that are need to buy. Identify unnecessary items and eliminate it. Always remind yourself that money spend cannot more than monthly income. Be a wise consumers and good at money management.

• Do not rely or treat credit cards as extra income. Tend to use cash to pay for the items which are cheap and can be paid by cash.

• Eliminate the habit of using credit cards. Remind yourself that you do not have much money to buy expensive things and it is same as using credit cards.

• Try to communicate with family about financial situations that you are having. Discuss with them to solve the problems. Parents will help to settle the problem and share the feelings with you.

In conclusion, credit cards are convenient and easy to use which are provided in Malaysia. At the same time, consumers have to be smart in money management and plan which payment methods are suitable to use, whether cash or credit cards. Therefore, consumers will not involve in credit card debts.

Referred links:
http://www.creditcardscities.com/
http://www.3debtconsolidation.com/creditcardmistakes.html (provided 2 videos about credit cards)