Credit Card Debts: Causes and Prevention

Credit cards, a small plastic card that can make payments for our purchases in a very convenient way. The growing use of credit card in this globalized world has indeed caused the surge of a new problem for many of its users who have very poor financial planning. This problem was made even worse with the downfall of the economy.

Causes
What are the causes of credit card debts? There are many factors that can lead to credit card users to owe their respective credit card companies. This problem mainly arises from poor financial planning, where people would spend much more than they could earn. These people would then use their credit cards to purchase stuff that they might not have been able to purchase, and yes, credit cards are supposed to make our life easier but it can really backfire if used in a wrong way.

Another factor is the tendency of some of these users to have multiple credit cards. They would use a particular credit card to make payments, but when they couldn’t settle the bill, they would transfer the balance to another credit card to hold the debt. This method would cause the debt to rise, although not by much but the rise would still be a significant amount if this trend is continued, especially over a long period of time.

Prevention
How do we prevent this from happening? Well, this is one case that our government have been highlighted and many prevention methods have been thought up to counter this problem. First of all, we have to understand the terms and conditions set by these credit cards.

Apart from that, we must also scout for the best deal around to avoid paying excessively for something that we shouldn't.

We must also ensure that credit cards are used to make cash advances as the last resort to avoid overspending.

To avoid owing the credit company a large sum of money is by making payments before the due date and make payments in full.

Limiting the number of credit cards is also another prevention method, and those with multiple credit cards, pay off fully the one with the highest charge.

Opinion
Credit card is in fact very useful in our every day lives, but we must always strike a balance in everything we do and do not use credit card excessively that it could lead us into trouble like having debts. Therefore, we must always be aware of the dangers and be prepared to prevent it from happening.

Relevant Links:

http://biz.thestar.com.my/news/story.asp?file=/2009/6/13/business/3938437&sec=business

http://biz.thestar.com.my/news/story.asp?file=/2009/6/13/business/3938437&sec=business