Credit card debt: Causes and Prevention.

Credit card debt results when a client of a credit card company purchases an item or service through the card system. In another ways, credit card can be defined as debt accumulates and raises via interest and penalties when the consumer does not pay the company for the money he or she has spent. In spite of the fact that goverment has organized so much financial planning seminar to reduce the credit card debts impact, but the amount of the people are still increasing in credit card debt significantly.

1.Lack of financial planning. People does not have a desire to make a well financial planning and basic money managemnet skills for their expenses and income. They usually dont make planning first to decide which things are wanted and unwanted , before they make a purchase decision.

2.Poor money management skills. Obviusly,most of the people cannot well manage or handle equilibrium between expenses and income. They do not have an income and spending budget, so they will spend over their income unwisely.

3. Reduced or lost of income. Serious debt may caused by divorce or unemployement. If there is a enormous gap between income and expenses, the alternative way to fill the gap is with credit card debt.

4. Saving too little or not at all. The feasible way to avoid unwanted debt is to prepare for unexpected expenditures by saving three to six months of living expenses. Apparently, a savings cushion in planing, a job layoff, illness or divorce will not cause immediate financial strain and increase debt.

5. No money communication skills. The most important things is to communicate with your spouse or significant other and your children about finances. Keep the lines of communication wide open and discuss financial goals and spending styles. If you are married to a spender and you are a saver, you will need to figure out a strategy for you both to get what you want. Knowing what credit accounts you each have and promise each other to be honest about what each other spends.


Although there are many causes of Credit card debts, there are also have some preventions and safety tips.

1.Photocopy the credit card offer which include the interest rate and terms. Then, form a letter to your credit card competitor companies mentioning that you are thinking of switching to their competitior because they are contributing a quite reasonable interest rate. As a result, credit card companies do not want to lose your business so they will offer a lower rate than the competitor company has offered.

2. Pay off smaller balances first. It is common for a person to try to focus on their cards with larger balances first. Pay off the smaller ones. It will take less time and you will feel a sense of satisfaction when you have actually completed your goal. This will boost your confidence and make it easier to tackle the higher balances.

3. Another alternative is to cut up your cards so that you are not tempted to use them. Save one card for emergencies.

4 If you have equity in your home, look into paying off credit card debt with a refinance or fixed-rate home equity loan. Do not use a home equity line of credit, the rates will rise as the prime rises and suddenly you may find it impossible to keep up with your bills.
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References:

http://www.mozdex.com/prevent-credit-card-debt/

http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp