Credit is the promising to spend future earnings in order to obtain a good or service today. A credit card entitling its holder to buy goods and services based on the holder’s promise to pay for these goods and services.
Credit card can be your best friend if uses wisely but it can also be your worst enemy without proper money management which leads to credit card debt. The debt will accumulates and increases via interest and penalties and the consumer will struggle to clear the balance for the rest of the year.
Causes & Prevention:
1) Excessive spending
1) Excessive spending
Spending too much on things you may not really need is likely the most common cause of amassing credit card debt. We’re living in a consumer culture, with glittery advertisements beckoning us to buy, buy, and buy around every corner. Sometimes, it can seem impossible to resist taking out that credit card and swiping it through to get what you want. But spending beyond your means will cause you to quickly become buried in debt.
So…….
To curb overspending, make a budget of your necessary expenses each month. And, most importantly, stick to it! Identify expenses that you don’t really need each month and eliminate them. Before you make an impulse buy, ask yourself, “Do I really need this? Or am I just spending money to spend money?”
2) Poor money management
Money management consists of everything from monthly budgeting to bill paying to savings and investment contributions. Dropping the ball in one area will likely cause control of your finances to slip out of your hands. For instance, if you miss paying your monthly credit card bills, you will be charged high late fees at substantially higher interest rates.
So……….
Set up an automatic bill pay transfer to take care of your monthly payments. Also, keeping a calendar (electronic or hard copy) for when your payments are due is another effective way to keep on top of your due dates.
3) Not saving or saving too little
Contributing regularly to savings account(s) is an important part of money management. If you’re contributing very little or no funds to savings, you will likely reach for your credit cards to cover any unexpected or emergency expenses
Contributing regularly to savings account(s) is an important part of money management. If you’re contributing very little or no funds to savings, you will likely reach for your credit cards to cover any unexpected or emergency expenses
So…..
Set up an automatic monthly transfer from your checking account to a savings account
4) Choosing the wrong card 
So….
Shop around and get a credit card personalized for your particular situation.
5) Not knowing the interest rate
So….
Find out the interest rate you were offered and also the interest rate the issuer actually gives you upon approval. In addition, check the rate on your monthly statements because credit card issuers can raise your rates for little or no apparent reason and with little warning.
Resources :
http://en.wikipedia.org/wiki/Credit_card
http://www.jermaineharris.com/2009/06/finance-103-credit-card-management/ http://www.3debtconsolidation.com/creditcardmistakes.
html http://www.cardratings.com/howtoavoidcreditcarddebt.html
http://www.jermaineharris.com/2009/06/finance-103-credit-card-management/ http://www.3debtconsolidation.com/creditcardmistakes.
html http://www.cardratings.com/howtoavoidcreditcarddebt.html
1 comments:
Good post with a handful of information which are constructive. :)
Credit card debts are really 'scary'. For student like me who likes to shop a lot, it is really tempting to apply for a credit card since it's so easy to apply for it. My parents have gave me a credit card under their name, which I barely used unless it's emergency.this to refrain myself from being a credit card debtors. :p
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