Credit card debt is an example of unsecured consumer debt.
Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases through interest and penalties when the consumer does not pay the company for the money he or she has spent.
The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies.
The late payment penalty itself increases the amount of debt the consumer has.
When a consumer has been late on a payment, it is possible that other creditors, even creditors the consumer was not late in paying, may increase the interest rates the consumer is paying.
Causes of credit card debt
Reduced income/same expenses
Always delay bringing expenses in line with a reduction in income as good reasons and let debt fill the gap.
Poor money management
A monthly spending plan is essential. Without one you have no idea where your money is going. You may be spending hundreds of dollars unnecessarily each month and end up having to charge purchases on which you should have spent that money.
Gambling
It is hard to stop gambling but loans are freely available. When a people start to gambling, the gamblers will not stop to gambling until need to create the credit card debt or make loan from the bank.
Medical expenses
The medical industry wants to get paid at the time service is rendered. They know that if they don’t, the chances of their getting paid drops. This is because more debt for you, less for them.
Saving too little
People always spend too much (unnecessary expenditures) instead of saving because they do not have any financial planning at all.
Financial illiteracy
Many people don't understand how money works and grows, how to save and invest for a necessary, or even why they should balance their checkbook. The schools don't teach it, your parents may not have explained on it.
Prevention of credit card debt
CREATE A CLEAR BUDGET
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.
DEAL WITH CREDITORS
Address the problem to creditors 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.
SELF CONTROL AND DISCIPLINE
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.
If you think you have bad in self control you can tear up credit card applications when the credit card company sends you those application forms.
Starts to spend less from today and stay with well financial situation.
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3 comments:
from ur post, i getting knoe about how is the advantages and disdvantae of using the credit card, beside that, many of people misuse the credit card. like inseat of spending more than saving.
Credit card can be convinience but also be trouble to people. How do u think?
Due to the unlimited payment by the credit card company, it causes many of its users gone into debt and users really should considering to take the proper steps to prevent themselves from entered into a high liability situation.
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