Monday, January 14, 2013

The Origin of Credit Card Debt

Before you can truly be free of debt, you need to be able to identify what caused it in the first place. You will read a lot of debt help articles that always instruct debtors to deal with the root cause of their problems. If you cannot see what caused you to be so deep in debt, then the possibility of falling back into the pit is not unlikely to happen.

You have to understand that despite the external factors that affect your finances, there are things that you can do to minimize their damaging effects. One of them is being careful with the debts that you will acquire. More than analyzing your finances, you should know the type of credit that you can take without drowning into it.

Credit card debt is one credit obligation that you should try to avoid growing at all cost. It is very easy to fall into is and quite hard to get out of. The difficulty lies in the high interest rate, finance charges and the various charges that get you into trouble when you default on your payments. Compared to the other types of debt, this is one credit that you can avoid acquiring - at least until you have learned how to manage it properly.

One of the origins of credit card debt that makes it a huge problem lies in its very nature. It allows consumers to purchase something even if they cannot afford it. They base their spending on a future income that is in danger of being taken away. That is one of the things that the recession during the early 21st century should have taught you. Even if your job seems stable now, it can suddenly be taken from you. This is what got a lot of Americans into trouble. They lived from paycheck to paycheck and they ended up trusting their future income as they as they acquire one debt after the other.

Another origin of credit card debt is having no financial net (a.k.a. emergency fund) to save them during trying times. Given that the future is uncertain, you need to be prepared for any circumstance. If you are suddenly left unable to work, how will you and your family survive? If you or someone you love is in need of medical attention, how will you pay for it? A lot of Americans turned to their credit cards to pay for basic necessities like groceries and medicines. They had no choice because they didn’t have enough emergency fund to tide them over a recent job loss.

Ultimately, the origin of credit card debt is living beyond our means. While everything was in abundance, we spent money left and right. We chose not to save since we want to enjoy life so much by paying for things and services that we do not really need.

To avoid the common origins of this type of revolving debt, you need to control your spending habits and practice wise financial management.

If you are deep in debt, do not worry because there are debt relief options that you can look into. You have debt settlement, debt consolidation and even bankruptcy. Just make sure you analyze your finances to find the best program that will enable you to achieve a debt free life.

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