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There are many reasons why we build up more and more credit card debt, even though we are trying to live a balanced life and continue to pay them off. Many of the top reasons why we keep building more credit card debt are as follows.
Many people can't control their excessive spending habits and end up maintaining these expenses when their income is lower, or lose their job. If you can't cut your expenses when your monthly income drops, then you will start to accrual more credit card debt if you pay for everything on your credit cards. The best idea is to control your spending. Cut down your expenses when your income is lowered.
Most people don't have a savings account, but contributing a certain percentage to your savings is a smart way to maintain cash on hand. Many people contribute very little, or even nothing to their savings account. This can be disastrous when an emergency arises and they have to resort to high interest rate credit cards, cash advance loans and payday loans. This can be prevented if you set automatic monthly withdrawals from your checking account to your savings account.
Poor money management is one of the biggest financial shortfalls many people have when attempting to control debt. Most people don't know where to start and what to do in order to reverse the cycle and become debt free. If you miss credit card payment and loan payments that are due, excessively high interest rates will be charged and more debt will be created. Your credit score will also be damaged from slow payments, late payments and missed payments. Change the way you pay your bills and set up automated payments for the minimum balances due. This will prevent late and missed payments on your credit cards and loans. Another way is to mark on your calendar when the payments are due.
Many Americans tend to overspend each month with money they don't have. This resorts them to credit cards to spend extra money on stuff they really don't need. Many stores offer great deals, impulse buys and daily sales that leave a consumer with the urge to spend money all the time. This is the quickest way to get really deep in credit card debt. You can prevent this by controlling your spending by setting a limited spending budget each month. Look for stuff that you really need and try to get the best deals possible before purchasing. If the price is too high or you don't really need it, then save yourself the extra cash and pay off those credit cards.
Medical expenses is a common hidden cost none of us really factor in. Accidents and illnesses happen, with a high cost from a visit to the doctor. Money should be set aside in savings for a rainy day with medical expenses. Try to avoid paying off medical expenses with credit cards and use your emergency fund in your savings account to pay for these bills.
Most people think when they have a credit card with a $5000 spending limit, they think they have $5000 extra in cash to spend. The available credit limit on your credit card is not supposed to be considered extra cash. That extra credit limit will accrual monthly APR charges and fees that will increase your debt. Just remember when you are using your credit cards to buy things, do you have enough cash to pay back the debt? If the answer is no, then don't use your credit card.
Many parents give their spouses and kids credit cards to use in case of emergencies or when they are out of cash. However, many times your own family members will spend a lot of money on credit cards without realizing it. Make sure you are communicating with your family members to watch how much they are spending and set a budget. If they are spending too much money on the credit cards, then consider taking the credit cards away so the debt doesn't get out of hand.
Income stops when you become unemployed. This will make your checking account balance shrink very quickly with daily and monthly bills, expenses and costs of living. Many people resort to credit cards as a safety net until they find more work to bring back their monthly income. It is a bad idea to use credit cards when you are unemployed. The best thing to do is use the money in your savings account sparingly, and eliminate all bills and expenses by cancelling what you don't need temporarily until you get another job.
The best things to do is use cash instead of credit cards. Yes credit cards are convenient, but they can become really inconvenient financially. Resort to cash more and it will limit how much you spend because you can only spend how much cash is in your wallet.
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