Will Your Credit Card Habit Lead to Bankruptcy?

One of the fastest ways to bankruptcy is the use - or should I say "misuse" - of credit cards. 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 ability to buy what you want now. You can then pay it off later, using very small and affordable monthly payments. Credit card issuers offer a way for us to make big purchases that we might not be able to make otherwise. Suddenly, it seems as though we can afford anything we want. 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 get caught up by 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 monthly minimum 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 many people filing for bankruptcy or a consumer proposal have just under $20,000 in credit card debt at the time of filing. That is a rather large wake-up call for many people. It also illustrates the rather unfortunate effect that debt can have on one’s finances. Many people just go along, living with their credit cards, until something happens to put them in an unfortunate financial situation. With their credit cards maxed out, and quite often no emergency fund, there is no way to meet their financial obligations. Bankruptcy seems like the only way out.

Avoiding Credit Card Debt

You can increase your chances of avoiding bankruptcy by refusing to build up excessive credit card debt in the first place. Credit card debt can damage your credit score, and cause other financial problems. On top of that, the debt strain can begin to take its toll on your relationships.

If you are interested in avoiding bankruptcy, here are some things you can do:

· Live within your means: Use a budget to help you spend less than you earn each month, so you won’t have to rely on credit cards to meet your financial obligations.
· Don’t carry a credit card balance: Pay off your balance each month so that you aren’t paying interest, and so that you don’t have to worry about defaulting.
· Start an emergency fund: Set money aside in a savings account so that you are better prepared for financial emergencies, and a source of cash when you need it.

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.
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One of the fastest ways to bankruptcy is the use - or should I say "misuse" - of credit cards. 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 appealing to consumers because they offer the ability to buy what you want now. You can then pay it off later, using very small and affordable monthly payments. Credit card issuers offer a way for us to make big purchases that we might not be able to make otherwise. It because easy to think that even the most expensive items are within our financial reach. 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 get caught up by the low minimum payments.

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 monthly minimum 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. Bankruptcy might seem like 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 debt can have on one’s finances. Many people just go along, living with their credit cards, until something happens to put them in a tough financial situation. With their credit cards maxed out, and quite often no emergency fund, there is no way to meet their financial obligations. Bankruptcy appears to be the only choice.

Avoid Credit Card Debt

You can increase your chances of avoiding bankruptcy by refusing to build up excessive credit card debt in the first place. Canadian bankruptcy can ruin your credit score, and cause other financial issues. On top of that, the money strain can begin to take its toll on personal interactions with loved ones.

You can work toward avoiding bankruptcy by creating a budget and living within your means. You should pay off your credit cards each month, refusing to carry a balance. You should also build up an emergency fund so that you are not at the mercy of an unexpected financial situation, and you have some cash to draw on.

With the right planning, you can be prepared so that you stay out of debt and avoid bankruptcy. Use credit cards wisely, and they are a very effective tool. But stay away from their darker side.

Your scribes are Corey Rozon, a freelance article writer, and Drew Cassels, who represent this portal offering credit card rates in Canada, a website that helps the public better understand how to use their credit cards more effectively and responsibly.
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