How Does People Get Into Huge Debt?

Lot of people misunderstand and misuse credit cards. Many of them live to the limit of their paychecks. Some use their credit card as if it were an increase in salary rather than an increase in debt. Many actually believe that credit gives them extra spending money.

The main cause of families to go into credit-card debt is the fact that it is built on impulse-they fritter their money away. Many Americans love to shop when they're bored, nervous, or anxious. A day at the mall can relate the tensions of everyday life. Shopping offers hours of escape, a chance to forget our problems and treat ourselves. That's when "impulse shopping" occurs. We may head to the mall to buy a pair of sneakers, but once there, our eyes start to wander. On impulse, we suddenly pick up things we would never buy if we had to pay for them with cash.

Impulse also causes us to be overly generous when buying birthday or Christmas gifts, to grab the tab in restaurants, to buy expensive status brands, or to buy more than what we need so we will not feel silly charging a small amount. Impulse shopping causes us to dig ourselves into debt. In other words, at the end of the month, we really do not know where our money went.

Impulse shopping is very common. The next time you head off to the mall, see how many out of these truths apply to you:

o More than half the things we buy are impulse purchases, bought on the spur of the moment

o Impulse shopping causes us to spend nearly three times more money than we had originally planned to spend

o Half the impulse items bought are unnecessary and often go unused

o Impulse items are seldom compared for cost or quality

There are quite a lot people, who can not control this impulse, shopping has become as addictive as gambling or overeating. For them, shopping has become the number one over-the-counter remedy for life's aches, pains, and disappointments. Most compulsive shoppers suffer from low self-esteem; they have problems in life that make them feel powerless and unimportant. Shopping helps restore their sense of self-worth and gives them a temporary feeling of being in control. A lot of compulsive shoppers come from abusive, alcoholic, or broken homes. What's surprising is that compulsive shoppers are intelligent, ambitious, and very optimistic about the future.

The next major contributor for huge debt is the interest charges. What people must understand is that the interest is charged each month on the unpaid balance and not the amount you send in. Most credit cards charge an annual interest rate of 18 percent, which works out to about 1.5 percent monthly.

These two factors combined together causes a surge in debt. Without managed in a right way, one could get into deep trouble.
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