Credit card debts : Causes and Prevention

Causes

Most debt problems arise when people experience changes in circumstances which leave them unable to meet their commitments. This can be due to the loss of a job, a birth, ill health, a bereavement, etc. The causes of debt can be devastating to people and their families. Causes include beliefs about future earnings, debt attitudes and financial knowledge. There are several causes of debt below:

1. Ignoring the debt problem is one of the main causes of debt.
2. Be unrealistic about basic needs such food, fuel, clothing etc.
3. Borrowing more money to pay off existing debts. This increases your outgoings and just delays dealing with the problem.
4. Not working out a budget so forgetting about occasional items such as school expenses, Christmas etc.
5. Not maintaining agreements with creditors, maintain it without fail. Do not ignore letters, reminders or default notices.

Prevention

By taking a few steps of prevention today, tomorrow your finances will have a clean bill of health freeing you to live a life of opportunity rather than of difficulty. Now, I will share some ways that how to avoid credit card debt

1. Manage your finances - starting with a strategy will help to keep you on track before you pull out the credit card. The first step is determining your monthly income and needed expenses. As part of these monthly expenses, figure in 5-10% of your income to set aside for emergencies, long range savings such as a retirement account, and short term savings.
2. Know your interest rate - If you’re going to use a credit card, regardless if you pay the balance in full each month, you need to know the interest rate. This means not only knowing what interest rate you were offered, but also the interest rate the issuer actually gives you on approval.
3. Pay on time - If your payment arrives before the actual due dates you will save more money on interest because any interest you pay is calculated based on the average daily balance.
4. Avoid extra expenses - Sometimes it’s the little extra expenses that sneak up on you before you even know it
5. Early Education - The best method for prevention is teaching our youngest generation all about money before they even qualify for a credit card. The earlier children learn how to manage finances the less likely they will be to fall into credit card and debt problems as an adult.