Thursday, July 2, 2009

Credit Card debts: Causes and Prevention

Credit card is provides holder to make purchase in advance up to a limit fixed by card issuer example Visa and Master card. But the holder need to pay higher interest on the average daily unpaid balance. Even there is higher interest but the credit card holder still increasing. If the card holder is abuse use credit card it will cause them bankruptcy because of too much of debt unable to pay back.

The causes of credit card debts are:
Attractive of bonuses that bank provide

Nowadays there are many bonuses or gifts provide to the credit card holder when the holder use the card. Example when there have the alternative of paying RM100 Cash or sign RM100 credit card and get a gift or collect points from the issuer. The credit card holder sure will sign the card instead of paying cash because free of gift is most attractive in human being.

Medical expenses
When emergency need to treatment and don't have enough cash on hand or bank account the best way to settle this problem is using credit card for payment. Because nowadays almost all doctors and hospitals are accept credit cards.

Low income High expenses
Human have a bad habit is like to spend a lot due to attractive advertisement and lack of self control. The problem is most of them are less income especially economic downturn recently but their expenses are never cut down. So they forced to use their credit cards for household, utilities and more when their income is unable to cover the high expenses.

Now one of the most popular activities to do through the internet is online shopping due to convenient to the user. Almost all the E-commerce activities need to payment by credit card. So the users just have to possessed a credit card, then they can buy the things through online.

The prevention of credit card debts are:
Budget planing (pay debt 1st b4 use)
The first step toward taking control of your spending is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. You must also keep following the plan until all credit cards have been paid off just continue to use and do not use those accounts again when the balances at zero.

Self-control 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. The important is you must always self control and discipline to make sure that not overspend and always think that use credit card like use of money even it is really not cash.

Cut down the limit
Limit your credit card use to certain categories of spending. Example pay only when there's no risk you will overspend such as insurances and utilities. Besides that, cut up your extra cards so that you are not tempted to use them and just save one card for emergencies.

Bring cash out no extra credit card
People spend more money when using credit cards compared to cash purchases. People also spend less when they look at their expenses in detail, the researchers found. So when you want to go out make sure that no bring extra credit card because the more credit card you have the more you spend.