Your Finances Can Be Impacted By Credit Card Debt
This article is all about avoiding personal debt, especially those incurred by credit cards.
Credit card use offers one of the quickest routes to bankruptcy. One of the more common reasons that people end up filing for bankruptcy is due to out of control credit card spending that leads to debt. Credit cards are so often too seductive because they offer the prospect of instant gratification, and the ability to repay large purchases using low – and affordable – minimum payments. Canadian credit cards offer a way for us to make large purchases that we might not afford otherwise. Suddenly, even the most extravagant purchases seem affordable. The low minimum payments seem reasonable, and easy to fulfill. That is one of the biggest traps associated with credit cards. It is easy to forget about the high rate of interest that you are paying; instead you focus more on the low minimum payments.
You can continue for years, making minimum payments each month and building up credit card debt. However, one day something may happen. You could have your hours cut at work, or maybe your minimum payment will be increased. You might have a costly hospital stay, or your home may be struck by a natural disaster not covered by your home insurance. Suddenly, your credit card payments don’t seem as affordable as they once did. After looking at your situation, it dawns on your how much credit card debt you have. The only way out of your financial mess may seem like bankruptcy.
Douglas Hoyes, a bankruptcy trustee who has seen more than his share of desperate victims of their own misuse of credit cards, points out that most people filing for bankruptcy or a consumer proposal have just under $20,000 in credit card debt at the time of filing. That’s quite the financial wake-up call for many people with credit cards. It also illustrates the rather unfortunate effect that credit cards can have on one’s finances. Many people just go along, living with their debt, until something happens to put them in an unexpected financial situation. With their credit cards maxed out, and quite often no emergency account, there is no way to meet their debt obligations. Bankruptcy seems like the only way out.
Wise Use of Credit Cards
You can increase your chances of avoiding bankruptcy by refusing to build up excessive credit card debt in the first place. Credit cards can hurt your credit score, and cause other financial stresses. On top of that, the money strain can begin to take its toll on personal interactions with loved ones.
Avoiding bankruptcy requires careful financial planning. You should create a budget, and track your spending. Live within your means so that you are not acquiring debt. Each month, pay off your credit cards. You can use credit cards as part of your financial spending plan, but you need to be careful to avoid carrying a balance. Finally, set aside money for emergencies. That way, if unexpected expenses come up, they won’t be as devastating. Being debt free, and having some savings built up, can go a long way toward helping you stay away from bankruptcy, and providing you with some of the cash flow you need.
With careful financial planning, credit cards can be a helpful tool, rather than a path to bankruptcy. Don’t let something so useful become your downfall.
Resources:
Corey Rozon and Drew Cassels write for this Canadian website where you can find credit cards online, and their chief goals are to provide consumers with excellent information they can use to be good credit card users.
If you are looking for a new credit card, apply for MBNA credit card today.
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