Causes & Prevention of Credit Card Debts

In 2007 there were over 2.3 million bankruptcies, the majority caused by unmanageable credit card debt. Is this credit card holders did not realize when banks approved their credit card and established their credit limit? This is an alarming signal that should get everyone's attention. Below are some causes and prevention of credit card debts.

Causes

1) Less income but more expenses
It so happens that the main breadwinner of the family loses the job but monthly expenses are not cut down in line with the reduction in income. This obviously leads to a rise in debt as the family is forced to use their credit cards for groceries, utilities, and expenses.

2) Poor money management
Poor money management is one of the reasons why there is an accumulated of debts. Not having a monthly spending plan and not keeping track of the monthly bills will make us unaware of where the money is going. Sometimes we might overspend without realizing it. Also, we might purchase useless items that charging on the credit card, thus have to pay interest on these purchases every month.

3) Medical expenses
Nowadays, the medical expenses are increasing every year. This is because almost every doctor accepts credit cards payments as it is so convenient. Patients are used to make credit card payment when they need treatment although they do not have enough savings in the bank account.

4) Gambling
Most people hope to win the lottery but the chances of that happening are 0%. They spend tomorrow's saved money today just because they expect a promotion in the job or are expecting an inheritance income without need to work hard. They may use the credit card to make gambling payments and this will eventually burden their life as they have accumulated too many debts.

Prevention

1) Stop adding the credit card debts
To eliminate credit card debt stop adding to the problem. If there is thousands of money in debt and continue spending more on the credit cards than this make thing obviously to get worse. We must stop using credit card to borrow from tomorrow for what we want today.

2) Set up a budget
This can be a difficult exercise for many of us since easy access to credit cards allows us temporarily to hide the truth that we spend more than we make. Budgeting helps to highlight how much wasteful and unnecessary spending we engage in that can be curtailed without undue pain. Nondiscretionary items such as mortgage or rent, utilities, food and insurance take up the bulk of most household budgets but it's important to allow ourselves to have some savings if possible.

3) Use cash rather than credit cards when possible
There is a reason that casinos give chips to spend instead or requiring cash: People do not attach the same value to noncash substitutes and will spend and bet more freely. It's the same with credit cards, and retailers know it. People spend more when using a credit card versus cash for purchases. So, next time you buy pair of new shoes or the latest CD, just try to pay by cash.

4) Get a better rate on your existing credit card
If you have thousands in personal debt it can really help the monthly cash flow if you are able to transfer those balances onto a low interest credit card.
Your credit rating will generally determine whether you can be eligible for the lowest rate offers but it could definitely be worth the effort. The low introductory "teaser" rate will last for only six to 12 months, but a smart consumer will use that time to aggressively paying down the debt, not running up more debt.

References:

1. http://www.fastweb.com/fastweb/resources/articles/index/102925
2. http://www.bankrate.com/brm/news/debt/debt_manage_2004/top-10-causes.asp