Credit card is any card that may be used repeatedly to borrow money or buy products and services on credit. It is issued by banks, savings and loans, retail stores, and other businesses. Credit cards can be very useful especially for emergencies. Therefore, using credit wisely is an important tool in establishing your financial independence.
Causes of credit card debts:
1. Poor money management - Without money spending plan, you have no idea where your money is going. You may be spending unnecessarily each month.
2. Excessive Medical Expenses – Credit card will probably become one of the sources of funds to pay off the medical expenses if health insurance is not adequate to cover the medical bills if one of your family members suffers serious illness. In United States, almost everyone pays their medical expenses by credit cards to get treatment
3. Financial illiteracy - Many people don't understand how money works and grows, how to save and invest for a rainy day, or even why they should balance their checkbook.
Preventions:
1. Making a budget - People have to create clear budget and stick on it that includes monthly bills, food, clothes, entertainment and miscellaneous expenses will prevent from overspending and fall under deeper debt load.
2. Self control and disipline - 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. The main prevention is aware of the causes of credit card debts and starts to spend less in order to stay with well financial situation.
3. Move your debts - This is by moving debt from a card with higher annual interest rate to a lower interest rate. This can eventually allow you to pay the lower amount of interest and buy more.
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