Causes of Credit Card Debts
1. Poor Planning and Overspending
Unexpected occurrences bring unexpected expenses. Despite careful budgeting, expenses that were never planned on can arise and cause people are incapable of paying for monthly bills. Some common examples of such unexpected expenses are property damage caused by catastrophic weather events, appliances that just stop working, and pricey car repairs. These and other similar things can greatly affect your ability to work at eradicating debt. Other than that, there is one common overspending phenomenon that happened frequently especially on people who likes to shop during sales and price cutting events by shopping malls. Shopaholics are among the people who are unable to withstand the attraction of price cut. They always shop without considering their needs and wants on the product and this behavior is known as impulse buying. Thus, impulse buying may lead to overspending and then credit card debts.
2. Lack of Savings
Research shows that majority of credit card debts caused by not saving enough. With sufficient savings, people will unlikely having financial problem. While not all financial woes can be completely avoided, they can indeed be made easier to deal with by being able to rely on savings to help in the case of an emergency. Sadly, many people do not see the importance of adding monthly savings to a budget. Doing so, however, is essential to successful management of debt.
3. Unexpected events
Unexpected events may cause credit card debts. For instance, jobs get lost. Due to outsourcing and downsizing on mass levels by large companies, many people have found themselves suddenly jobless. Such an unexpected change financially can cause serious money problems, including the inability to pay off debt.
4. Health Problems
Credit card debts can be related to health problems. A host of debilitating illnesses can leave their victims without the ability to work, as do many accidents. Because of having medical expenses but not having an income, putting money towards the elimination of debt on a monthly basis becomes very difficult to arrange.
Credit Card Debts Prevention
1. Budgeting
Create a budget and stick to it. A clear budget that includes all of your monthly bills, food, entertainment and miscellaneous items will prevent you from spending thoughtlessly and buying on impulse.
2. Review financial records
Maintain clear financial records and a regular payment schedule. Disorganization can cause you to overlook bills and overestimate how much you have to spend. Dedicate a specific time every month (just after payday is best) when you can sit down with your finances, pay your bills and determine how much you have to spend for the month ahead.
3. Limit the use of credit card
Only use credit when you can pay it off within a few months. Using credit cards with no plan to pay the debt is reckless, irresponsible and can get you into big trouble. The longer it takes you to pay off the debt, the more interest that debt will incur--and the more you'll end up paying.
4. Limit the amount of credit card
Shred or tear up credit card applications that come to you in the mail. Just because you get the application doesn't mean you need or want the card. Destroying the application will prevent you from using it and protect you from potential identity thieves.
5. Make saving as a habit
Save for a rainy day. Direct a portion of your paycheck directly into your savings account so you never even see that money. Aim to save enough money to be able to pay your bills for 6 months in case you lose your job or have an accident.
6. Maintain insurance coverage
Health and home insurance are absolute musts in order to avoid debts. Unexpected medical bills, flood damage and fire damage can lead to ruin if you aren't properly covered.
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