A credit card is part of a system of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.

Most of the time holding credit card is equal to holding debts. Credit debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.

Is RM24.4 billion big money? This is the amount of credit card debt owed by Malaysians, according to Bank Negara Malaysia’s statistics as at end of March 2009. Speaking of credit debt reasons, we can pick out a host of various factors that may have a dramatic impact on financial situation.

Causes of debt ~
1. Poor Money Management
Poor money management is one of the best reasons why so many people accumulate lots of debt. Not having a monthly spending plan and not keeping track of monthly bills makes you unaware of where your money is going. People might be spending hundreds of dollars every month toward items that are useless and have no value in life, yet do not realize it. While money is going towards purchasing useless items, you might also be charging your necessary purchases on your credit card, forcing you to pay interest on these purchases every month.

2. Less Income, More Expenses
People prefer to pay with credit card because it is convenient and can be used regardless whether there is any money in your account. It so happens that the main breadwinner of the household loses the job but monthly expenses are not cut down in line with the reduction in income. People always hold more than one credit card, so they will use one card to cover the debts of the other cards. This obviously leads to higher interest rates and a rise in debt.

3. Savings little or not at all
Savings is the most simple and important way to avoid debt. We can pay with credit card for many things and it is crucial for us to pay off the balance each month. Sometimes we might have some unexpected expenses, if without some savings or during the layoff time we are not able to pay back the credit card bill and end up with a rise in debt.

4. Social Pressure
Social pressure one of the most common reasons people sight for getting into debt, it is the need to feel like they are keeping up with everyone else. In other words, it leads many people to unnecessarily spend money on things that they don’t really need so they can feel like they fit in. It is an age old cycle with devastating consequences.

5. High Interest Rates
Everyone can use the credit card but not everyone able to pay off the balance. Carrying a balance, though, is very costly. Interest rates can be as high as 21% and by paying the minimum payment per month (usually about 2% of the balance) credit card companies are quite happy to loan money for your purchases. If you unable to pay off, debt plus interest plus compounded interest it will cause accumulation of debts.

Prevention ~
The key to good health begins with a dose of prevention. Financial health is no different. By taking a few steps of prevention today, tomorrow your finances will have a clean bill of health freeing you to live a life of opportunity rather than of difficulty.

1. Manage your finances
First step is determining your monthly income and needed expenses. As part of these monthly expenses, figure in a portion of the income to set aside for emergencies, long range savings. If you have some savings then you avoid having to put large amounts of debt on a credit card in times of a crisis. Next, you have to stick to your budget and it is often more difficult task. In order to help you keep on track of the budgets, you may put motivators in place. But just keep in mind that whatever you choose as a reward, it shouldn’t compromise the hard work you’ve done in managing your finances.

2. Pay the balance in full and pay on time
Pay the balance in full is important in keeping control of your credit cards. Before using a credit card for a purchase, often ask yourself whether have fund to pay for this. In cases of emergencies where your emergency fund won’t cover the whole amount you need to charge, at least pay more than the required minimum payment. Never make a late is also a very important concept. Because of the universal default clause in credit cards’ terms and conditions, credit card companies can raise your interest rate if you are late paying any creditor or even your utility company.

3. Know the interest rate
Regardless if you pay the balance in full each month, you need to know the interest rate. This means not only knowing what interest rate you were offered, but also the interest rate the issuer actually gives you on approval. In addition, check the rate on your monthly statements because credit card issuers can raise your rates for little or no apparent reason and with little warning.

Even those who don’t carry a balance need to know their interest rate because emergencies do happen. While it’s always a good idea to have an emergency fund, sometimes the job search takes longer than expected leaving you with no other choice but to put some expenses on the card. If you’re not up to date on your interest rate, you might end up paying more in interest than you have to.

4. Keep the right perspectives
Now today, nearly everyone has access to a credit card. Much of the problem with credit card debt problems comes from changes in credit card availability, advertising, and values. There is a shift from saving for the future to a society of trying to keep up with satisfying the desire of the moment. Add the purchasing power that comes with a credit card and you have the perfect formula for disaster. There’s one thing that consumers have to know, it’s that you don’t have to be a slave to the credit card company or even to the seduction to be a slave to the credit card company or even to the seduction of advertising. You can have control over your financial health without depending on a credit card.

Other than that, credit card holders also can cut up cards so that not tempted to use them and just save one card for emergencies. Do not overspend. Yielding to the sale offers for something that you don't really need, is a big mistake that leads to overspending. Prevention is always better than cure. If we use credit card appropriately, we can enjoy the benefit of the cards and at the same time free ourselves from the problem of credit card debts.

Related Links:
1. http://www.3debtconsolidation.com/top10-causes.html
2. http://en.wikipedia.org/wiki/Credit_card_debt
3. http://www.credit-land.com/articles/articles_page_68600_1881780_120.php
4. http://www.nurido.at/news/social-pressure-a-cause-of-credit-card-debt-124653.html
5. http://www.cardratings.com/howtoavoidcreditcarddebt.html