Credit card debts:Causes and Prevention

Credit card debt is an example of unsecured consumer debt. Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she spent. It can prove a temptation too far, and soon they find themselves in debt. In fact, spending on a credit card is borrowing money. It is a debt and must be repaid at some point. The results of not paying this debt on time are that the company will charge a late payment penalty and report the late payment to credit rating agencies. The late payment penalty itself increases the amount of debt the consumer has.

There are several causes of credit card debts. Firstly, while the convenience and free credit feature of credit cards ,make them potentially useful to everyone, many consumers run up large unpaid balances on their card accounts and continually make sizable interest payments. The card issuers make this easy by asking that the cardholders make only a minimum monthly payment, which is usually far less than the unpaid balance.

Secondly, credit card interest rates are high so the profits can be high. Banks and other credit card issuers are after their slice of that big money, including from you. They can justify big marketing budgets to get your money. I deliberately do not say "get your business". You will resist better if you think "they are after my money."

Thirdly, it is very easy to get credit cards, multiple credit cards in fact. 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.

Fourth, your friends, neighbors and work colleagues will probably all have multiple credit cards, talk about them and flash them around from time to time. That can all influence your own attitude to credit card debt.

Fifth, depending on what country you are in, yours may be a " have now, pay later" society. Immediate gratification can take precedence over common sense. If everyone else is doing it, it surely must be right? It is wrong especially if the interest rates are too high.

If you have credit cards, but have not yet let your spending get out of hand then now is the time to take stock of you position and make some decisions about your financial future. Ask yourself what do you want those credit cards for? Do you just want them so that you have a source of payment in emergencies, to shop occasionally online, or when you travel abroad? Or do you plan on going on a shopping spree and spending the rest of the year struggling to clear the balance? Most people do not intend to ever use up their credit limits and max out their credit cards, but it is surprisingly easy to do and can be very difficult to undo. So, we will discuss several preventions that the credit card holders may take into account.

Firstly, most people know that credit card companies have given them far more than they reasonably can afford to pay back. So, it takes self control and discipline to keep these cards in your wallet and not over spend on them.

Secondly, you may plan all your borrowing. Sit down and write down what you absolutely must buy over the next year and add what you would like to buy. Total the cost and write down each month budget. Make sure you will not over budget.

Thirdly, you may pay off smaller balances first. It is common for a person to try to focus on their cards with larger balances first. Pay off the smaller ones. It will take less time and you will feel a sense of satisfaction when you have actually completed your goal. This will boost your confidence and make ir easier to tackle the higher balances.

Fourth, if you can afford it, pay doubles the minimum payment. The minimum payment usually pays just enough to cover the interest and a little more that pays downs the balance. Paying extra will pay your balance more quickly.

Fifth, credit card holders should avoid carrying a balance on credit cards, but if you do end up carrying a balance, make it a priority to pay it down. If you have more than one credit card carrying a balance, pay the minimum on the cards with the lowest APR and concentrate on eliminating each credit card, one at a time, starting with the card with highest APR.

In conclusion, we should always plan before spending especially in the case that the interest of the credit card is high sometime. Finally, we will manage to get rid of credit card debts.