Even if you have poor credit, there's still a good chance you'll qualify for a credit card. Subsequently, you put yourself in position to do one of two things:
- Use the credit card to improve your credit standing and score
- Abuse the credit card, which can lead to a variety of financial problems in the future
It's important to understand that there is more than one cause of credit card debt. If you know why and how this happens, you have a better chance of preventing trouble. Here are some of the most common causes:
- Unemployment. If you suddenly lose your job you may find it difficult to pay off your credit card debt. As a result, interest charges add up and your situation slowly begins to spiral out of control. Underemployment, such as when you're not paid as much as you deserve, is also a problem.
- Divorce. Everything is going well in your marriage, and then out of the blue, something happens and divorce is staring you right in the face. As your financial situation changes, you could find yourself relying on credit cards to make ends meet.
- Poor money management. Simply put, if you don't manage your money appropriately, you're going to find yourself in trouble at some point. The best way to protect against this is to create (and follow) a budget that outlines both your income and expenses.
- Making the minimum payment. The nice thing about a credit card is that you only have to make the minimum payment every month. The bad thing about this is that it results in monthly finance charges, which ensure that it will take you longer to eliminate your balance in full.
With so many different causes of credit card debt, you need to keep an eye out for anything that could stand between you and future financial success.
If your credit card debt is too much for you to handle, it may be time to learn more about Chapter 7 and Chapter 13 bankruptcy. This is a big step in your financial life, but it may be just what you need to make things right once and for all.