Causes of consumers Overspent & Credit Card debt
Nowadays, consumer always deals with problem of overspending. The creation of credit card is the main root of overspending. However, why most of the consumer will encounter with this problem ???? Below are some relevant reasons:
- Lack of knowledge of money management
As we know that most consumers do not have the knowledge on how to manage their money. Why is this problem occurring? Most of the time is due to there is no budgeting made by consumer. Without budgeting, consumers will not know how much they spend as well as how much money they have. Therefore, they tend to spend more than their income. This is problems often happens on those credit card users whereby they will only make payment a payment after purchasing.
- Do not have the habit of saving money
Most of the consumers do not have the habit of put a portion of money to their saving accounts. During inflation, all goods and services has become relatively expensive than before. Consumer need spend more money to buy same value of goods or services. Moreover, there is no saving in their bank account to meet the unexpected expenses and thus consumer will be faced with the problem of credit debt.
- The used of credit cards
Another cause of credit debt is the increasing relies on credit card. Most consumers will have a wrong perception that they have enough money to make payment a month after purchasing goods and services. There is increased amount of consumer is preferred to purchase something by using credit card rather than paying cash. Although it is convenient but actually it is a way leading to high debt. Consumers have to pay for principle portion plus interest rate that is charged by bank. It is more expensive as compared to make cash payment.
- Reduced in income
Due to economy downturn, consumers’ income has decreased significantly. Consumers often do not adjust their spending to match with the reduction in income. Without preparation of budget, consumers would not know exactly how much they have spent and thus overspending will be occurred.
- Excessive Medical expenses
Medical expenses can not be avoided by almost every family. We often deal with problems when our family members have faced with illness or serious diseases. The medical bills are high and most of the time people tend to make payment by using credit card. If they are not able to pay if the amount is due then the debt will carry forward to the following month. Eventually, debt will be accumulated month by month.
Ways to prevent and control credit debt
- Prepare your own budget
It is advisable to have monthly budget to prevent credit debt. Budget should be prepared based on your income. Consumer should control themselves to spend according to the budget. They should spend their money on necessary goods or services instead of spending on those unnecessary spending.
- Self control and discipline
The most important element to solve credit debt is the consumer itself. They should
manage their money properly as well as make spending wisely. It is advisable to spend on necessity goods and services especially during economic downturn in order to avoid debt.
- Avoid using credit card
It is recommended do not to rely on credit card as it will lead to creation of debt. Consumer should not use future money because we could not predict what will happen in the future. The used of debit card can be substitute of using credit card because you can only spend money that you are actually owned.
- Keep your money in saving account
Consumer should save a portion of their money in their saving accounts. This is important to pay unexpected expenses or during financial problems. Holding cash is relatively important particularly during economic downturn in order to prevent incurring excessive debt .
References:
http://www.creditcards.com/credit-card-news/5-simple-credit-card-debt-rules-1267.phphttp://ezinearticles.com/?Why-We-Overspend-Our-Dollars&id=237361
http://www.3debtconsolidation.com/creditcardmistakes.html
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