Credit Card Debts: Causes& Prevention

Open your wallet now, and count, how many credit cards you have?
Check on your monthly bills, how much you have to pay every month for your credit card debts?

Nowadays, nearly everyone has access to a credit card. Many of us like to put some bills onto credit card and try to delay the payment as long as possible. Credit card companies offered different interest rates and payment schedule which you think it is easier and cheaper to solve your bills. But, it actually makes users harder to pay off all the debts. Thus, it created more and more credit card debts and also the interest charges on overdue balances.

So, check out how to build a healthy financial status. We need to find out what the causes of credit card debts are and how we prevent it from threaten our financial health.

1) Poor financial management: we always spending money using credit cards, but when the bills reach your hand, you have no idea where you spent so large amount of money that month. Thus, we have to work out a plan on spending. Therefore, a budget for whole month is really needed. You can just write out your expenses daily, and compare to your income, so that you won’t spend more than you earn each month.

2) Zero saving or too little: once you recognize your expenses each month, figure out 5% - 10% of your income to set aside for emergencies or unexpected expenditure. People used to pay their car repair fees or medical expenses by credit cards since they have no saving for those unexpected fees. So, just prepare some saving to avoid unwanted debts or financial strain.

3) Spending habit: woman mostly, shop for a whole day and just using few credit cards on payment. But they have no idea how much they had spent for the whole day. Every time you pull out the credit card to pay at the counter, the debts is become higher and higher. Credit card is not cash which you can physically feel the thickness it appear in your wallet. So, you must record and limit the amount you spend every time you make payment.

4) Limit the cards in wallet: every credit card has its own set of terms and condition including varying interest rates, penalties, fees, and due dates. Try to bring one or two cards instead of five or six. If you focus all your expenses on two cards, you can easily found the total amount you spent. But, if you pay using different card every time, you will forget the amount you spent and interest rate for each card. Besides, try to compare each credit card companies and find out the lowest interest rates companies.

5) Pay on time: some people used to pay only the minimum amount of monthly bill. But, it actually makes you pay more interest in the future. Because of the universal default clause in credit cards terms and conditions, credit cards companies can raise your interest rate if you are late paying creditor or utility company. Therefore, never make a late payment and try to pay earlier since the interest calculated based on average daily balance. So, the earlier you pay the less interest you pay.