Understand How Credit Cards Can Cause Bankruptcy

July 24, 2011 by  Filed under: Credit 

Bankruptcy can be a very difficult thing to deal with, and it is unfortunately still happening to many people every day. There are many factors that can combine to result in bankruptcy, and you need to learn about them if you wish to avoid becoming bankrupt yourself. A big contributing factor of bankruptcy is the over use of credit cards. If you are currently bankrupt, or are worried about the possibility of it in the future, read some of our advice on how to manage your cards better.

What makes credit cards so potentially dangerous to your finances are the same aspects that people love about them, you can buy now and pay later, and they are very convenient. Because of this convenience of use, and the attraction of getting something now and paying for it later, many people today are using their card too much, making more purchases than they really need to. This is resulting in many people holding large credit card balances that are being charged a considerable amount of interest every month.

Also, credit cards are typically only used to make small to medium purchases, mainly consisting of consumable products like clothing, grocery shopping, hotel rooms and air fares. If someone finds themselves without a job, which in this economy is more and more likely, they will find themselves with a large balance on their cards and no way to repay it. Because they have used the card to purchase non-assets they will have nothing to sell to repay their debt if necessary. This is why credit card debt can be more dangerous than other debt such as a car loan or home loan, because at least with these loans you can sell your car or your home to repay your debt. With credit card debt, if you lose your job you may have no way to repay it, and it may cause you to enter bankruptcy.

There are a few things you can do to reduce your risk of becoming bankrupt. The first thing is to really look at what you are using your cards for, and the current balances you are holding. If your current balances are too high then you should be looking at ways to reduce them. You may find that you are using your card too often and for purchases that are not necessary. If this is the case then you need to stop this behavior right away, you can even cut up your cards if you need to.

Remember, credit cards can be beneficial, but only when used wisely. Use your cards carefully and you will drastically reduce your chance of causing yourself serious financial damage.

For more advice about credit cards for bankrupts read some of the information on our site. We also have some good tips on how you can set up a credit card repayment plan to help you get your debts under control and avoid bankruptcy!

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