9 Reasons Why Credit Cardholders Fall Into A Debt Cycle

Posted on Dec 26 2013 - 9:46am by Ian Elbanbuena

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Having a credit is truly a convenient thing. It allows you to buy the things you need that are a little out of your purchasing capability as long as it’s within your credit limit. A credit card is a handy thing to have during emergency purchases, and goes a long way in helping you manage your money better. However, there is always the possibility of falling into a debt cycle if the credit card holder is careless with credit card use.

Credit card debt can cause a person more than just a little financial inconvenience; rising interest rates can cause serious complications and even legal ramifications. As with many other things, prevention is always better than the cure, and learning why many credit cardholders fall into debt is a great way to ensure that you can avoid being in the same situation.

Here are the 9 most common reasons as to why people find themselves shackled with credit card debt:

1. Unnecessary Large Purchases

This almost goes without saying. A lot of people, especially new credit cardholders, tend to go and purchase something that they believe to be something they need and end up not being able to pay for.

While it’s nice to go and buy that big TV you’ve been eyeing for quite some time, it’s best to make sure that you are in an ideal financial position before you put such a large purchase on your credit card.

2. Impulse Buying

Impulse buying is definitely a distinct possibility when you walk around carrying a tool that enables you to purchase almost anything you want. Impulse buying can be defined as making unnecessary purchases on merely a whim. For most people, the temptation is just too great to resist. Whether it’s while physically shopping or browsing for items online, the danger of impulse buying is always present.

How does one prevent such an occurrence? Like with most of the issues that will be pointed out in this article, impulse buying can be prevented through discipline and self-control. Prioritize your needs and only purchase non-essential items when it would not greatly impact your finances.

3. Lack of Foresight

Impulse buying can be a product of lack of foresight. Foresight is the ability to analyze a situation and anticipate possible outcomes. There are a lot of credit cardholders that tend to neglect the consequences of not just their credit card use, but the frequency with which they pay their credit card bills.

Such a lack then leads to continuously escalating debt. Always focus not just on the immediate effect of using your card, but also on how each transaction affects your “financial big picture”.

4. Poor Financial Management

Certain people just tend to use whatever money they have on hand without considering if that specific amount is already allocated for something else. Not setting aside a portion of your income for financial obligations like paying your utilities and rent and what have you would usually lead to you spending money that you may not have. This then usually leads to more credit card use, making the burden of credit card debt greater.

Proper budget allocation is an important part of financial stability. The ability to delegate portions of your income to where they should properly go would prevent confusion and unnecessary card usage.

5. Poor Personal Management

While this may seem like an unusual excuse, a lot of people actually rack up credit card debt simply due to forgetting to pay their credit card bill on time. This usually happens to individuals who move around a lot or have more than one job. People with active lifestyles tend to overlook certain obligations like paying the bills because they seem “trivial.”

Again, this is something that can’t be solved by developing an appropriate mindset. By being diligent in settling your accounts on time, you’ll be able to avoid problems like debt.

6. Not Paying Small Credit Card Bills

Most refuse to seriously take the effect of not paying credit card bills that they view to be a small amount. Delaying payment on such debts would take a toll on the finances of the credit cardholder in the long run. Over time, the seemingly negligible credit card debt can become an in insurmountable financial crisis.

Keep in mind that small problems become big problems when not dealt with properly.

7. Other Users

Sometimes, a person can be really careful with credit card usage but still wind up in debt thanks to other people using the card. Entrusting the wrong person with access to your credit card account more often than not leads to that wrong person running up your card.

It’s not that having extensions is a bad thing, but it would be best to be really careful when selecting the person to whom the extension goes out to. Establishing usage boundaries is important.

8. Not Reading the Fine Print

This usually goes hand-in-hand with impulse buying. A credit card holder has a tendency to make transactions on impulse, oftentimes neglecting to pay attention to the finer details of said transaction. There are instances wherein added charges are put on the card that the credit cardholder would not normally agree to. This then leads to the cardholder spending more than expected, adding to a continuously growing credit card debt.

In every purchase or transaction, it is vital to find out every single piece of information one can. Sometimes, these seemingly negligible pieces of information add up and have a tremendous impact on one’s finances. Read the fine print. It won’t cost you anything, and sometimes it would even save you money.

9. Carelessness with Personal Information

In this day and age where we can all do most of our transactions online, it’s way too easy for everyone to be a little careless as to where we input our credit card numbers. Issues like identity theft can wreak havoc on one’s credit card account when an unknown individual gets ahold of your personal info and places charges on your card.

Always take extra care when engaging in transactions that would require you to put in your information. If something seems shady or suspicious, trust that instinct. Only engage in such transactions with credible companies to ensure that you will be able to avoid the hot mess that is credit card debt.

All of these reasons can be summed up to one primary reason as to why people find themselves on the negative side of credit card debt: personal discipline. Or simply, lack thereof. Every action has consequences, and this can’t be more true than in the world of finances. Think before you charge, be careful, and you will be relatively debt-free.

Photo Credit: Wikimedia/Suez (sophia)

About the Author
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Ian G. Elbanbuena is an online education advocate and a content contributor. He’s representing Paradigm Global Education Management Ltd (PGEM) He’s main vision is to improve lives of individuals through online teaching and study programmes. He also help in giving hope to students who want to come up with better career and college experience through SAT/ ACT Training, study programs, university counseling, tutorials and corporate advisory services.