Leading causes of peoples debt problems

Posted on November 26, 2007
Filed Under Quotes & Charts |

Today we see more and more that people are falling deeper and deeper into credit card debt. Usually most of the time people do not even realize it is a problem until they are in over their heads and cannot make payments. The root of this problem is a lack of discipline.

Leading causes of credit card debt:

Overspending- this is huge. People for some reason get a false sense of security when they have possession of a credit card, which often times leads to people spending much more on items then they would have otherwise. If you do not need something and do not have the cash for it or money in the bank for it, then do not charge it on your credit card. Forming this habit can greatly reduce the amount of debt you can find yourself stuck in. You have to look at it for what it is. When using credit cards essentially what you are doing is spending your “future income”.

Impulse Buying: This is the worst. A good example would be when you go into Best Buy with the intention of buying a new DVD that you do have the money for. But then you see the for sale sign for a brand new HD DVD player. When in reality you do not need it, but the impulse drives you to charge it on the card. This single habit alone leads many into a deep dark road riddled with credit card statements and late fees.

Having too many cards: For some it is just to hard to throw away those credit card offers that come in the mail, saying that you are pre-approved for a credit limit of over 5k. If you have the card in your wallet you will at some point use it, no matter how disciplined you tell yourself you are. So a word of caution would be to just throw all those offers away, look at each one of those as a financial noose around you neck.

Now for those that have already found themselves down the road of credit card debt, there are some options to get credit card debt relief.

Credit Counseling: With credit counseling you can expect to see the interest rates reduced on your accounts. Then you only make one monthly payment to the credit counseling agency in which they disperse to your creditors for you. This method utilizes a fixed payment throughout the program which greatly reduces the time you will be in debt when compared to monthly minimum payments.

Debt Consolidation Loan: This usually requires something of collateral, in most cases people use their homes equity. You obtain a loan at a lower interest rate than that of your cards and then pay them off, and not only make payments on the loan. For many people this isn’t even an option because they have nothing they can put up for collateral.

Debt Settlement: With debt settlement the actual balance that is owed will be reduced, not the interest rate. So the savings of money are huge plus the fact that you will get out of debt pretty fast. A good debt settlement company can in many cases lower peoples debt amounts by 50% and help the debtor become debt free within 2 years or less.

Bankruptcy: This is obviously last resort. But for some this is the only realistic option available. While there are negative effects on one’s credit, it is not the end of the world. You will be able to obtain credit again in the future. But after going through a bankruptcy it would be hard to imagine why you would want too.

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Leading causes of peoples debt problems

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