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 has spent. 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. When a consumer has been late on a payment, it is possible that other creditors, even creditors the consumer was not late in paying, may increase the interest rates the consumer is paying.

Now, I would to share some causes of credit card debt. First, with prices of goods and services going up and not the income, more Malaysians are forced to spend beyond their earnings. Thus, they will use credit card to purchase goods and services and unable to pay back the expenses. Lastly, with no savings, people can also be sucked into credit card debt by unemployment. They will use the credit card to cover basic living expenses and may found difficulties to pay back the amount.

Let me share some tips to prevention credit card debt with you all. First, if you find yourself making interest payments every month on your credit cards, the first step is to assess your income and expenses. Total your monthly expenses and subtract them from your income. This is your disposable income after expenses, and also the amount you have each month to use as you deter mine.

The next step is to stop charging items on your credit cards and pay cash for items you must buy. Then analyze your credit card debt, pay credit card debt with highest rate of interest in priority. Use your disposable income to completely pay off the card with the highest rate. Once that card is paid off, close the account and destroy the card. Then focus your attention on the next card, and do the same until all of the debt on your cards has been completely paid off.

Finally, just use one or two cards and use them as a financial tool. Remember that a credit card is not the same as free money. If you still have problem, leave you credit card at home while you are shopping.

Conclusion, credit cards should be used for emergencies only, unless you plan on paying the entire balance off immediately. Never pay the minimum amount due unless you truly cannot afford any more.