Credit Card Debts: Causes and Prevention
Tuesday, June 30, 2009
In Malaysia, the current credit card debt stood at RM24.4 billion on March 2009 itself which was relatively low compared with other regions while countries such as England is facing a credit card debt going into trillions of pounds.(Source:Mmail.com)
The question is what are the major causes of credit card debts? How can we prevent it from falling upon us? The answer to it will be explained next.
Top 5 causes of debt
1) Less income/Same expenses
For instants, the main breadwinner of the household loses his job but monthly expenses are not on par with the reduction in income. This obviously leads to a rise in debt. The family is forced to use their credit cards for groceries, utilities.
2) Poor money management
Not having a monthly spending plan and not keeping track of monthly bills makes you unaware of where your money is going. You might be spending hundreds of dollars every month towards items that are useless and yet you do not realize it.
3) Under-employment
If you are underemployed meaning you are not getting enough working hours at your job, you should also cut down on your lifestyle to match your current income. Live within your means.
4) Hoping to win the lottery
Most people hope to win the lottery but the chances of that happening are 0%. Do not spend tomorrow's saved money today just because you expect a promotion in your job or are expecting an inheritance from a deceased grandfather. We all know things can go wrong more easily than going right.
5) Huge medical expenses
The cost of obtaining cures and medicine is increasing every year. Almost all doctors accept credit cards here in Malaysia. While you need treatment now, you do not have the cash. So what do you do? You use your credit card because you do not have enough savings in the bank.(#point 2)
Credit cards are not evil and in many cases having a credit card is very necessary. Some people just need solid credit card debt management advice in order to keep everything under control. Hence, here are the guidelines.
1) Stop accruing more debt
The more you continue to spend, the longer it will take for you to pay it off. Reduce your spending. If you have high interest credit cards, transfer the balance to ones with a lower APR. That way your debt won’t increase while as you’re paying it off.
2) Increase your income
If your current salary isn’t enough to cover the payments on your debt, get a second job. Even a few hours a week can make a huge difference. Look for flexible freelance work that will fit around the rest of your life.
3) Change your spending philosophy
Are you only buying the things you really need? Those impulse purchases may feel good at the moment, but in the long run, they will only get you further into debt. If you’re going to get out of debt, you will need to change your whole attitude to spending.
4) Make a budget and stick to it
It easy to overspend when you don’t have a budget. Calculate how much you have to spend and stick to that limit. Write down all of your expenses so you know where your money is going.
Video: How to create a Do-able budget
5) Set up an emergency fund
When you’re in debt, it’s hard to think about putting something aside for a rainy day. Every day feels like a downpour. But it’s crucial to have even a small emergency fund. Just make sure you don’t tap into it unless it’s truly an emergency.
Video: How to get out from Under Your Credit Card Debt
(Sources:
www.3debtconsolidation.com
www.ezinearticles.com
www.linkroll.com
www.bankrate.com
www.youtube.com)
The question is what are the major causes of credit card debts? How can we prevent it from falling upon us? The answer to it will be explained next.
Top 5 causes of debt
1) Less income/Same expenses
For instants, the main breadwinner of the household loses his job but monthly expenses are not on par with the reduction in income. This obviously leads to a rise in debt. The family is forced to use their credit cards for groceries, utilities.
2) Poor money management
Not having a monthly spending plan and not keeping track of monthly bills makes you unaware of where your money is going. You might be spending hundreds of dollars every month towards items that are useless and yet you do not realize it.
3) Under-employment
If you are underemployed meaning you are not getting enough working hours at your job, you should also cut down on your lifestyle to match your current income. Live within your means.
4) Hoping to win the lottery
Most people hope to win the lottery but the chances of that happening are 0%. Do not spend tomorrow's saved money today just because you expect a promotion in your job or are expecting an inheritance from a deceased grandfather. We all know things can go wrong more easily than going right.
5) Huge medical expenses
The cost of obtaining cures and medicine is increasing every year. Almost all doctors accept credit cards here in Malaysia. While you need treatment now, you do not have the cash. So what do you do? You use your credit card because you do not have enough savings in the bank.(#point 2)
Credit cards are not evil and in many cases having a credit card is very necessary. Some people just need solid credit card debt management advice in order to keep everything under control. Hence, here are the guidelines.
1) Stop accruing more debt
The more you continue to spend, the longer it will take for you to pay it off. Reduce your spending. If you have high interest credit cards, transfer the balance to ones with a lower APR. That way your debt won’t increase while as you’re paying it off.
2) Increase your income
If your current salary isn’t enough to cover the payments on your debt, get a second job. Even a few hours a week can make a huge difference. Look for flexible freelance work that will fit around the rest of your life.
3) Change your spending philosophy
Are you only buying the things you really need? Those impulse purchases may feel good at the moment, but in the long run, they will only get you further into debt. If you’re going to get out of debt, you will need to change your whole attitude to spending.
4) Make a budget and stick to it
It easy to overspend when you don’t have a budget. Calculate how much you have to spend and stick to that limit. Write down all of your expenses so you know where your money is going.
Video: How to create a Do-able budget
5) Set up an emergency fund
When you’re in debt, it’s hard to think about putting something aside for a rainy day. Every day feels like a downpour. But it’s crucial to have even a small emergency fund. Just make sure you don’t tap into it unless it’s truly an emergency.
Video: How to get out from Under Your Credit Card Debt
(Sources:
www.3debtconsolidation.com
www.ezinearticles.com
www.linkroll.com
www.bankrate.com
www.youtube.com)
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