Credit Card debts: Causes and Prevention

~Personal Expierience~
Past few weeks which is during the period of Chinese New Year, my mum and my big brother came back from Singapore to Malaysia by airplane. The moment they landed on the ground, my big brother(Sunny) wanted to buy an necessary item(souvenir), Wine for my relatives. Without the local currency, my brother decided to use the convenience of his credit card to pay the bill. Unfortunately, things had frustrated my brother as his credit card had blocked due to his outstanding payment. However, my big bro insist that they shouldn't had blocked his credit card as the reason are he has a credit limit of RM5000 and 3 months period of time to pay his debts. Perhaps my bro outstanding payment merely reach amount of RM500++ and owe for 2 months ++ period of time. Cut the whole long story to short, my bro had called and inquired for any exception in order to activate the credit card as he mentioned that he has a very good past history payment and he has always diligently pay the debts well. However, after the verbal dispute with the CIMB operator, the result was, they will not activate without clearing the debts in fact. Sad~

Anyway, what is Credit Card???

Any card that may be used repeatedly to borrow money or buy products and services on credit. It is issued by banks, savings and loans, retail stores and other businesses. However, if credit card are not properly used or tend to misuse it, debts could definitely occurs.

According to NaturalNews, credit card delinquencies have reached another peak nowadays and this debts could become the burden in crushing the economic growth in long term. In addition, when it has become a severe debts, depression could happened. In the worst case of scenario, people will even committing suicide due to unable to clear the debts. What caused the occur of credit card debts actually?

Through research, these are the CAUSES of debts generally.
1. Reduced income/same expenses. Too often we delay bringing expenses in line with a reduction in income for a host of good reasons and let debt fill the gap. The sooner you adjust to your new reality, whether it be temporary or permanent, the better off you'll be.

2. 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. Planning is no more difficult than writing down your expenses and income and reconciling the two. You will be surprised at how powerful you'll feel when you are making thoughtful decisions about where and when to spend your money.

3.Gambling. Gambling may be fun and entertaining, yet if it becomes addicted, it will be difficult to stop. Ya, may be it is not an big issue if you are using spare money to gambling. However, borrowing money for gambling through credit card will surely lead us to financial disaster.

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

5.Banking on a windfall. Spending tomorrow's money today is very tempting. Especially if you believe that tomorrow will come no matter what. A planned job bonus may not be a sure thing. The inheritance that you believe will come your way may not. The lesson is don't spend the money until the check clears.




There are some TIPS in PREVENTING the consumers from falling into the pit that is credit card debts:
1. The first thing to prevent credit card is having the right and low interest credit card. Nowadays, credit card companies constantly offer promotions with low interest rates, some even as low as 0.00% interest. If the credit company charge you with a high interest or even ask you to pay annual subscription fees, negotiate with them!!!

2. Always engraved on your mind that, Pay On Time!!!! If you can afford it, pay double the minimum payment. The minimum payment usually pays just enough to cover the interest and a little more that pays down the balance. Paying extra will pay your balance more quickly.

3. If possible, try to use cash as priority instead of credit card. Only use your credit card when you are carrying a balance or in urgent situation.

4. Keep your credit limit low in order to prevent you to spend in excess. As a result, you will be more conscious of your spending and will end up spending less.

5. One of the most significant taboo of using credit card is, don't ever get tempted on using it. Plan plan plan!! Always plan what you wanna spend regardless of your food, beverage, necessary items, etc. Being aware and conscientious whether your income received can cover your spending. In fact, cut up your cards so that you are not tempted to use them and save one card for emergencies.

In conclusion, credit card could be a very convenient tools indeed. However, in the other hands, it could also lead you into a deep pit as well. As a result, should people hold a credit card in fact?? Yes, but with the requirement of MUST managing their finance issue properly and have the will power to say "NO" on spending when times are not appropriate. So, live life to the max with CREDIT CARD!! :)~



Reference and Related links:

http://www.investorwords.com/1199/credit_card.html

http://www.naturalnews.com/008582.html

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

http://www.kold.com/Global/story.asp?S=1097800

http://www.creditcards.com/credit-card-news/5-simple-credit-card-debt-rules-1267.php

posted by ttR