Credit cards, if used properly they are convenient and a great budgeting tool. If it is abused, using credit cards can be the start of a years-long nightmare and unbelievable stress. There are some causes of credit card debts.
1. Spend, spend, and spend.
Spending on credit card is same as borrowing money. If you using it without control, it will lead you to high debts situation. When you use credit card to purchase, one of the disadvantage is you will not be aware how much you have already spent, this may lead to over spending situation.
2. Income less, expenses more..
Nowadays, the price of groceries, utilities, and etc is rapidly increasing, but not in income. Because of this some group of people are forced to use credit card for purchase. This obviously leads to a risen in debts.
3. Poor money management
This is one of the reasons that why so many people accumulate a lot of debts. If you do not have a monthly spending plan or you do not keep track on the plan, you will not be aware what have you spending to, or you may spend on something which are not necessary.
How to prevent it?!
1. Having a good money management plan is very important. If you have planned properly for your expenses within the range of income you have, you can avoid using credit card.
3. Make sure that you settle the bills on time. if you really cannot pay back the whole balance, then you should try to paid as much as possible, or else the credit card debts will keep on grow up and up.
2 comments:
Prepaid smart card is another way of managing your funds. In this case all the money is transferred to a smart card and the purchase is done using the card. In this way we are not borrowing but restrict our shopping only to the amount loaded in this smart card.
In India, Modular Technologies is offering this e cash service solution which is also secure. The cash is loaded onto the embedded microprocessor chip. The transaction is done only when authorised using a PIN. Like in credit card the establishments has to enroll for this system. The establishments can also use this as a loyalty card.
Of late people use the credit card only because they do not want to carry cash. Quite a few people do not want to use credit card but they will welcome this idea of epurse.
Some of us got the habbit of using future money.Credit card is future money too.Lately, many banks had adopted the tiered pricing structure for credit card users to promote the use of credit cards as a payment instrument.This had been suggested by Bank Negara Malaysia since 26th June 2007.Malaysia bankruptcy case is kept increasing.Those who went bankrupt are usually young executive who just joined the working world not long ago and perceived that money is easy to earn.Credit card company is in loss if they unable to settle all the payment.According to the figures reported early this year from Malaysian local papers and various sources, more than 40% of 8.8 million credit card holders only manage to pay the minimum 5% of their outstanding balance. Credit card defaulters account for RM 700 million of the country’s RM 18.6 billion in non-performing loans and unpaid credit card loans.
Under the new system,credit card users will have the free 20 days interest rate from the statement date and is applicable only for cardmember who pay in full on or before the payment due date.After that, interest will be count on each purchase transaction. For those who unable to settle the whole outstanding balance or settle with minimum balance, will be charge with 18% interest rate.For users who have a good track record of settling their credit card balances which are due each month, promptly for 12 consecutive months, the finance charge will be reduced from the maximum of 18% per annum to not more than 15% per annum.
This system is to encourage users to have good financial management and avoid credit card debt burden.
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