People borrow on credit cards because it is easy, once you have the card you can borrow money without having to fill in a form. There is also the temptation to regard the available balance on your credit card(s) as money that you have available to spend, and not consider the monthly interest costs of using it.



Credit cards are so common nowadays that it is extremely unusual to meet someone that doesn't have at least one. If you do meet someone without a credit card it's a bit like meeting someone that doesn't drink - you wonder whether they are a very disciplined person or a recovering addict! Following my own debt problems I was until recently in the latter category. I have now been given a credit card (at a very high rate of interest) and this prompted me to consider why I had got into trouble with credit cards in the past. Could it all happen again?.

Credit cards are of course a very useful financial tool if used correctly. They can help smooth over temporary variations in your income or expenditure and are just about essential for staying in many hotels. They are however a very expensive way to borrow money on a medium to long-term basis..

So Why do People Borrow on Credit Cards?.

If you have available credit on your cards it is very hard not to think of this as money that is yours to spend. People are often helped into this way of thinking by introductory offers that give low or zero interest for a number of months. During this introductory period you can spend without incurring any monthly charges and it really does seem like free money. There is a big shock in store when the low/zero rate period ends - suddenly you will find that your monthly spending budget has been cut by the amount of interest that you have to pay. This can then start you on a debt spiral..

What is a Debt Spiral.

A debt spiral starts when you need to borrow money because you don't have sufficient money to pay for either what you need or have decided that you must have. Unless this imbalance in your income and expenditure is temporary the problem is made worse by having monthly repayments/interest. You therefore need to borrow more and more to keep the same standard of living, with the growth-rate of your debt getting faster and faster. Unless stopped at an early stage this process can very quickly lead to serious debt problems..

How to Avoid Credit Card Debt Problems.

If you are ever tempted to overspend on you cards remember that doing so will only make your finances worse in the long term. Try to resist the temptation to buy the latest gadgets or clothes in the knowledge that this will enable you to afford more things eventually. If you already have credit card debts then consider carefully whether a debt consolidation program could help you to reduce your monthly payments.