Credit cards are issued after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card.
Credit cards with low introductory rates are limited to a fixed term, usually between 6 and 12 months after which a higher rate is charged. As all credit cards assess fees and interest, some customers become so encumbered with their credit debt service that they are driven to bankruptcy.
Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
Causes:
- Gambling
Gambling is fun and entertaining but if it becomes addictive it'll be hard to stop. This won't become a problem if we spend our spare money for gambling. But borrowing money through our credit cards for gambling will surely lead us to a financial disaster.
- Poor money management
Do we really know where our money is going?If we don't have an income and spending budget chances are, we cannot set aside some money for saving and emergency needs.
It is not hard to get a credit card, but we cant misuse it.
Preventions:
- Control the spending
Keeps our credit card spending to amounts that we know we can pay off, don't go over-board with unnecessary purchases, and budget how we plan on paying back our charges.
- 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.
- We should pay off whatever we can as soon as you can do it, so our balances not grow exponentially as time passes.
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