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Credit cards can be a great tool but all too often we find we've spent more than we can manage to pay back. This is especially true when we have multiple credit cards and lose track of how much we owe on each of them. Nowadays, credit card debts are major cause of bankruptcies each year. It is because many people do not pay money that they have spent to the company. Therefore, debt accumulates and increases via interest and penalties.
Causes
POOR MONEY MANAGEMENT
Poor money management is ONE of the best reasons that why so many families have accumulated many credit card debts. It is because people are unaware to conduct a monthly spending plan and do not keep tracks of monthly bills. People have never realized their spending on the items that are useless and do not have any value in their life. This might force them to pay interest on these purchases every month. Thus, it has lead to rise in debts by using credit cards.
FINANCIAL OVER LIMIT
The downside to credit card debt is that the interest rates alone can force the average person or family to eventually have to rely on bankruptcy. If they can't afford something they really want, they charge it. Then when it comes time to paying the bill they pay the minimum amount due (very bad thing) only. This then accumulates an awful amount of interest and the next month when you get your bill, the balance is about the same.
TOO MANY CREDIT CARDS
Many people think that having many credit cards in the wallet is representing sign of wealth. In fact having too many credit cards is one of the factors that drive a people towards credit card debt. Many people do not realize that every single money used from credit cards has to be repaid and that too with interest.
Prevention
STOP USING CREDIT CARDS
The credit card users need to stop using credit cards, unless it is an urgent situation. The smart card user only uses the card in place of cash, or to obtain a purchase they can afford. Once the user has reduced credit card debt, they can stop worrying about falling deeper into debt.
SELF CONTROL AND DISCIPLINE
One of the best practices is to have a direct set up so that able to pay back the full amount each month and use in emergencies. Thus, self control and discipline to keep these cards in wallet and would not overspend.
MAKING AN BUDGET
The users have to create clear budget and stick on it that includes monthly bills, food, clothes, entertainment and miscellaneous expenses. This will prevent from overspending and fall under deeper debt load.
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