Posted on October - 13 - 2011
Causes of Credit Card Debt
What causes credit card debt? Unfortunately there’s no one-size-fits-all answer to that question. While it’s easy to simply blame every cardholder and say they screwed up, that isn’t true. Today let’s look at several possible causes of credit card debt instead of jumping to conclusions.
Here are four common reasons consumers get into serious credit card debt.
1. Irresponsible Spending
While not all credit card debt is the result of someone’s irresponsible behaviour, much of it is. It would be difficult to deny that. If you spend more than you can afford to pay back, you’re going to get into trouble. The concern is that we sometimes rush to judgment and assume this is someone’s reason for being in debt even if it isn’t. Now that we have that covered, let’s look at some less predictable causes of credit card debt.
2. Divorce
People don’t get married and merge their homes, families, and finances with the intention of getting divorced. Yet it happens. Frequently. A sudden or nasty divorce can lead to serious financial problems — including credit card debt — for one or both of the partners involved. For example, one spouse might intentionally run up debt while they’re still listed as an additional cardholder on their spouse’s credit card, leaving them responsible for the charges. Or one partner could be left with nothing and forced to turn to credit cards to get by temporarily.
3. Medical Emergencies
An even more unexpected and tragic cause of credit card debt is a medical emergency. Perhaps a cardholder is seriously injured while travelling abroad and their insurance isn’t accepted. They might have to rely on a credit card to help them cover hospital expenses before leaving their destination. Or a medical emergency at home could put someone out of work for a short time where they rely on credit cards to help them make ends meet.
4. Job Loss
The loss of a job can also cause people to turn to credit cards to cover expenses. Or the loss of income can impact a consumer’s ability to continue making timely payments on an existing credit card balance. Again, the situation isn’t entirely in their control.
This isn’t to try to make excuses for anyone’s credit card debt. But if you know someone who is struggling financially, it might be smart to try to understand why before simply assuming they spend too much recklessly.
Have you ever had problems with credit card debt due to situations beyond your control? Share your other examples and how you dealt with them in the comments.
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