Credit Cards Can Get You Into Financial Trouble
Credit card use offers one of the quickest speedways down the road to bankruptcy. One of the more common reasons that many people end up filing for bankruptcy is due to excessive credit card use. Credit cards are so attractive to 21st century consumers because they offer the opportunity to make large purchases now instead of saving up. You can get what you want now, and then make small, seemingly affordable minimum payments later. Canadian credit cards offer a way for us to make large, desirable purchases that we might not be able to make any other way.
And, as if we were kings and queens, it seems like nothing is beyond our financial grasp. Really? The low monthly payments seem reasonable, and easy to fulfill. That is one of the most deceiving traps associated with credit cards. It is easy to forget about the high rate of interest that you are paying; instead you get caught up by the low minimum payments and keep making more purchases.
It is possible to pay the minimum for years, accumulating credit card debt, until one day something happens. The credit card issuer may raise your interest rate or minimum payment. Perhaps you lose your job. Maybe some unexpected medical or natural catastrophe occurs, costing you a great deal of money. Suddenly, your credit card payments don’t seem as affordable as they once did. You look at your finances, and realize how much credit card debt you have. Bankruptcy suddenly becomes attractive, as you think that it might be the only way out.
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. Looking at that much credit card debt can be a real wake-up call. It also illustrates the rather unfortunate effect that even the best credit card can have on one’s finances. Many people just go along, living with their debt, until something happens to put them in a unfortunate financial situation. With their credit cards maxed out, and quite often no emergency fund, there is no way to meet their financial obligations. Filing for bankruptcy seems like the best option.
Staying Away from Credit Card Debt
Those who want to avoid bankruptcy do their best to avoid credit card debt to begin with. Credit card debt can damage your credit score, and cause other financial issues. On top of that, the debt strain can begin to take its toll on your relationships.
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.
When you are careful, you can use credit cards to your benefit, rather than finding yourself on the road to bankruptcy. Make sure to use them wisely.