Credit Card Debts : Causes and Prevention

The Credit Card Debts

Credit card debts are major cause of bankruptcies each year. It is because many people have never realized of its consequences from financial and non financial perspectives when get a new credit card or not enough safety net when there is an incident happen.

Causes of consumer overspent

1. Poor money management is one of the best reasons that why so many families have accumulated many credit card debts. It is because people are unaware to conduct a monthly spending plan and do not keep track of monthly bills. People have never realized their spending on the items that are useless and do not have any value in their life. Thus, it has lead to a rise in debts by using credit cards.

2. Credit card will probably become one of the sources of funds to pay off the medical expenses if health insurance is not adequate to cover the medical bills if one of your family members suffers serious illness. In United States, almost everyone pays their medical expenses by credit cards to get treatment.

3. Today, gambling has become part of entertainments in our life. It is hard to stop when it becomes addictive. Thus, it will surely lead to a financial disaster if borrowing money through credit card for gambling.

4. Fees that must spend for divorce such as attorney, division of assets between husband and wife, proceeds given to children are the way to rack up huge debts by using credit card if it is the gap between the expenses and income. Moreover, it will lead to reduction in income because divorce may force some people to quit their job and to have a walk in other countries.

5. Households are forced to use credit card for groceries, utilities and some expenses purposes to maintain current lifestyle when the main breadwinner of the household has loss his job and could not find a new job during short periods. This may lead to a rise in debt when expenses are not cut down in line with the reduction in income.

How to control credit card debts

1. People have to create clear budget and stick on it that includes monthly bills, food, clothes, entertainment and miscellaneous expenses will prevent from overspending and fall under deeper debt load.

2. Address the problem to creditors instantly to investigate whether they could give revised payment arrangement when having trouble to pay off debts because running away is not a good solution. If not, may refer to Fair Debt Collection Practices Act if the collection of money from creditors is not fair enough. Creditors may approve proposal and accept modified payment plan when hiring a good credit card debt consolidation companies.

• One of the best practices is to have a direct set up so that able to pay back the full amount each month and use in emergencies. Thus, self control and discipline to keep these cards in wallet and would not overspend.