Posts Tagged ‘reasons for rising credit card debt’

9 Things That Can Create A Mountain Of Credit Card Debt

There can be an array of different signs that you can look out for in order to find out if you are heading toward a mountain of credit card debt. It is however important to note that all those factors are born out of unwise use of credit cards. Plastic money does offer lots of convenience, but if you carelessly use the same without any proper planning or budgeting, you are very much likely to be pushed do deep into an ocean of debt that it will become almost impossible to come out of it. The most unfortunate thing is that most people just do not realize that you using their credit cards unwisely and when they see an “unexpected” hike in their overall outstanding balance, they keep on wondering “how did it happen”. Following is a brief rundown on nine most common factors that you must try to avoid at all cost.

You Have Reached The Maximum Limit Or Crossed It

If you have reached or crossed the maximum limit on your credit cards, the chances are that you are not just heading to but actually already facing a mountain of credit card debt. The only thing you can do to improve your situation is to pay off your debts faster. Once your debts are paid off, make sure you do not repeat the old mistakes and plan thoroughly on how to use your cards wisely.

There Are Past Due Accounts In Your Name

If you have some past due accounts in your name, it means you are either having difficulty in making the payments or you are trying to “conveniently” avoid the actual debt by just making the minimum monthly payments. It is very important for you to keep in mind that the longer the outstanding balance stays in your name, the faster it will grow. Within a couple of months, a decent looking debt may start looking like a monster, mainly because of the high rate of interest and hefty penalty charges that most credit card companies charge on such accounts.

You Buy Expensive Items (That Are Otherwise Unaffordable For You) By Using Credit

You must learn how to live within your means. If you cannot afford an expensive item, it does not make any sense to purchase it using your credit cards. If you do so, you will certainly have difficulty in making the repayment, which will eventually push you deeper into credit card debt. Always remember, if you know that you cannot afford to buy certain thing, never use credit to make it “affordable”.

You Have No Planning For Debt Repayment

There is an old saying, “those who fail to plan actually plan to fail”. If you are not serious about the repayment of your existing debts, your debt problems are likely to grow fast and become fiercer. Not paying off your debts in time will result in unnecessary payments toward various charges on it for several months to come while at the same time your debts will keep on becoming harder to pay off. Therefore, you must create a budget and stick to it – debt repayment must always be a top priority in your budget plan.

There Is No Emergency Fund

In the absence of an emergency fund, people often tend to use their credit cards when they have to meet some urgent expenses. When you are already in a financial trouble and your budget is also already stretched out, using your credit cards will lead to rising credit card debt, which will be hard to pay off.

Spending More Than You Earn

You must look at your monthly income before you charge your credit card. Will you be able to make the timely payment with your available income? If not, it will be quite unwise to use your credit cards just to satisfy your temptations. Impulse buying is one of the major culprits that force people to spend more than they earn. So, once again, you must learn how to live within your means. If you are paying less toward your debt and continue charging your cards for more purchases, your overall debt will obviously keep on rising.

You Do Not Pay Much Attention To Your Monthly Statements

Many people do not give much importance to the monthly statements that they receive from their credit cared companies. Just ignoring those statements is not going to help you get rid of your debt problems. You still owe those debts. Therefore, a better strategy is to read those statements thoroughly to get a clear understanding on how much principal amount is due, how much interest have been charged, and how much penalty you are liable to pay. When you will see it yourself how your credit card debt can grow fast if you do not pay off the same soon, it will motivate you to create a debt repayment plan and to implement other strategies to regain control of your debt situation.

Playing The Balance Transfer Game

Many people just keep on playing the balance transfer game in order to avoid payments. The balance transfer does make some sense in specific situation, but not in a situation like this. Though avoiding payments may provide you some instant relief, it will eventually lead you to a deeper debt problem. So, do not try such quick fixes. No quick fixes can ever work unless you plan to and actually pay off your debts.

Using Credit Cards To Meet Basic Needs

Credit cards are not supposed to be used to meet the basic needs of your life, such as clothing, food, grocery, and gas. If you are using your cards for these kinds of purchases, it is a strong sign that you are heading toward a deep debt problem.

Overall, if you do not want to get into credit card debt, you must follow the above don’ts.

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