Credit Card debts: Causes and Prevention

Credits cards are a relatively recent development. It allows consumers to purchase products or services without cash and to pay for them at a later date. To qualify for this type of credit, the consumer must open an account with a bank or company, which sponsors a card. They then receive a line of credit with a specified dollar amount. They can use the card to make purchases from participating merchants until they reach this credit limit and the user will have to settle the bill when it arrives. Credit cards are designed with complex security features to prevent the possibility of fraud. These features involve the card's account number, its signature panel, and its magnetic stripe.

Credit cards, when used properly, are convenient and a great budgeting tool. If abused, though, credit cards can be the start of a years-long nightmare and unbelievable stress. There are several reasons that cause the users to spend too much by using credit cards and we will explain along the ways to control credit card debts with the causes.

First, the user has poor money management that he/she spend without a plan which will lead the user to have no idea where the money is going. 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.

Secondly, majority of underemployment user may think that it is just temporary (taking a break), but they never thought of the expenses they spent through using credit cards and having to pay it at the end of the month when the bills come. Therefore, users who are underemployment should get those expenses in line with current income or quickly get a second job or a better job to start increasing your income in order to pay your debts and it is also the time to start adding in come of the previous spending.

Thridly, users save too little or probably not at all. The easiest 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. No one has ever regretted having a savings cushion.

Fourthly, users do not have money communication skills. It is important to communicate with your spouse or significant other to discuss about financial goals and spending styles. If you are married to a spender and you are a saver, you will want to map out a strategy for you both to get what you want. Know what credit accounts you each have and promise each other to be honest about what each other spends. Many people find out that their spouses have racked up thousands of dollars in credit card debt and they had no idea that the accounts even existed. This will lead to a divorce in a family.

Lastly, credit cards are too easy to apply nowadays. For example, UOB VOX Card. They have plenty of rewards and benefits such as no annual fees on supplementary cards, get cash rebates, exclusive invites for movies and much more which attracts people to apply it. Issuers of credit cards make it easy for you, if you have had no debt problems in the past. If they seem to take it lightly, it is understandable that their customers do too. But remember, they take the risk factors into account when setting interest rates. That’s why they are so high. Therefore, we must consider and communicate with our family members to have a financial plan before applying credit cards.

Resisting the pressures of the credit card society will be a lot easier once you have set your mind to it, and started to feel the benefits. Enjoy the process, and you will be a cash convert for the rest of your wealthy life.

- Carmen Lee Jia Wen -