What is credit card? Credit card is any card that may be used repeatedly to borrow money or buy products and services on credit. It is issued by banks, savings and loans, retail stores, and other businesses. Credit cards can be very useful especially for emergencies. Therefore, using credit wisely is an important tool in establishing your financial independence. Unfortunately, a lot of people use credit cards as a "crutch." If they can't afford something they really want, they charge it. When it comes the time to pay the bill they pay the minimum amount due. This is where credit card debt arises where debt accumulates and increases via interest and penalties.
Causes of credit card debts:
1. Poor money management - Without money spending plan, you have no idea where your money is going. You may be spending unnecessarily each month.
2. Banking on a windfall - Very often, spending tomorrow's money today is very tempting. It is advisable that don’t spend until you hold an amount of money in hand.
3. Financial illiteracy - Many people don't understand how money works and grows, how to save and invest for a rainy day, or even why they should balance their checkbook.
Preventions:
1. Prioritize your debt repayment - Credit card users are advisable to pay off your debts to get rid of the highest interest payment first. List all of your credit card debts, and the amount you are paying each month. Pay off the lowest amount first. Then use that money to start paying off the second lowest amount.
2. Move your debts - This is by moving debt from a card with higher annual interest rate to a lower interest rate. This can eventually allow you to pay the lower amount of interest and buy more.
3. Cut up your cards so that you are not tempted to use them - Pick the one with the lowest interest rate and cut up the rest. The one you keep should be deemed an ‘emergency card.”
References:
1. http://en.wikipedia.org/wiki/Credit_card
2. http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp
3. http://ezinearticles.com/?Credit-Card-Debt---Prevention-Is-Better-Than-Cure&id=226244
1 comments:
In my opnion if you have alot of credit card debt the first thing you should do is leave all credit cards at home or just cut them up. Trust me your finances will thank you.
If you have a problem with debt opening up more debt is NOT a good idea, balance transfers often have fees attached and usually just free up more credit so consumers with poor money management skills can get deeper in the hole.
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