Credit Card Debt : Causes and Preventions

Credit card is a system of payment by using a small plastic card issued by the credit card company. Credit card flow by issuer lends money to the user of the credit card to purchase items from merchant then users pay backt he credit card company later.

Credit card debt arises when the customer has use credit card to purchase items or services. Besides that, there are some causes for credit card debts:

1. Consumer overspent because they keep thinking them can pay off back the debt in future by monthly installment hence it has increase the debt owe
2. Consumer keep late payback the debts and causes the interest charged on the debts keep accumulated until the consumer unable to clear off the debts
3. Poor money management, consumer doesn’t plan their money spending carefully and simply spend their money on something unnecessarily.
4. Consumer can get more than one credit card because credit card was easy to apply. Because of this, the consumers can unlimited use the credit card to purchase item which causes its debt keep increase.
5. High interest rate charge by credit card company has caused the rise of credit card debt because the user unable to pay off the debts

Prevention method from credit card debts:
1. Keep good record which means consumer should make sure them don’t take on more debt that them can safely afford to pay back.
2. Don’t overextend which means consumer must make sure that their debt to asset stay within manageable levels. Many professionals recommend that your level of indebtedness should not exceed your cash on hand
3. Budget carefully which means consumer should anticipate levels of indebtedness and plan your monthly payments. Whenever them make budget must make sure include of “Balloon Payments to pay off large amount of debt at once.
4. Carefully select credit card which offer advantageous interest rate because it will help the consumer keep their payments within manageable limits.
5. Consumer should make payment on times because late payment can reduce consumer is credit rating and put them in default on some type of loan and it may trigger an increase in interest rate consumer pay on the debt and cause their cost of borrowing increases. In order to avoid such problem consumer should make payment in times.