Purchases to avoid

Using credit cards for daily living expenses is strongly discouraged. That terrific night on the town that you splurged on may eventually cost you three or four times the actual tab if you leave it on your card for an extended period. The same applies to groceries, entertainment or travel expenses, filling up your tank at the gas pump for your daily commute, or any other routine daily expenditures that should always be paid for with cash.

Living within your means is the road to solvency

You also need to be wary of impulse purchases of all sorts, especially if they are for expensive items. Sure, all the neighbors will be jealous when you use your credit card to purchase a 55-inch digital television for your annual Super Bowl party. But again the ultimate down the road cost to you may be three or four times the actual purchase price – even if the television was marked down by an incredible 30 percent.

There are a lot of ways for people to fall into debt in this distressed economy. Some cannot be avoided and others are self-inflicted. No matter the reason, the results are the same. Individuals and families struggling to survive mountains of dent when they are living on limited means. Here are eight reasons why some people fall deep into the money pit.

• Medical Expenses. This is the most common reason for people to max out their credit cards and accumulate other debt. With millions of Americans lacking any healthcare insurance coverage at all and millions of others dealing with very high deductibles and a broad range of medical expenses that are not covered by reimbursement, this is a significant national problem.
• Divorce. One or both parties may find themselves resorting to credit cards to finance a divorce. And the more unpleasant the divorce, the more the respective attorneys are going to have their hands out for the cash needed to expedite the legal process.
• Deceptive Introductory Rates. As W.C. Fields was fond of saying, "Never give a sucker an even break." Deep discounts on credit card interest rates are highly enticing, but very short lived. You should be wary of "limited time offers" or "special promotional" rates for regular card use or balance transfers.
• Ignoring the Fine Print. According to surveys, not even half of credit card holders have read the fine print on their agreements and it is unlikely that those who claim to have read them thoroughly have understood all of the financial and legal implications and ramifications. Buyers beware!
• Cash Advances. Although convenient on the surface and tempting to those in the midst of a cash crunch, these advances usually come with higher than normal interest rates and may also have special service fees that quickly pile up and then compound.
• Ignoring Monthly Statements. One of the easiest ways to ensure that you are not a victim of identity theft or scam operated by criminals is to closely read your statement as soon as you receive it. If you order a lot of merchandise online and are unsure where a particular vendor is located, this is an especially important tip.
• Paying the Monthly Minimum. Even if you cut up your card right now, depending on how your balance is and how much money you can put toward your monthly payment, it can literally take you decades to get out from under your mountain of unsecured credit card debt.
• Charging Daily Expenses. Those giant cups of gourmet coffee, extravagant restaurant meals, fashionable clothes, and outings to see the hottest music or theatrical attraction will be distant memories by the time you pay off these indulgences and extravagances. Your most effective money management tool is cash. If you can't afford to pay cash for your impulse items you need to learn to do without.