The use of credit cards has become more prevalent. In fact, according to Shift, 70% of people have at least one credit card. Another surprising statistic is that 14% of Americans own at least 10.
A lot of people think too much of the benefits and not much about the dangers of credit card debt. Now, the total credit card debt of Americans is at $1.04 trillion. This is according to the Federal Reserve.
This goes to show just how effective and convenient it is to use the credit cards. Moreover, there are a lot of benefits with using the powerful financial tool. One of the main benefits of using credit cards is to build credit history.
Having a good credit history can allow an individual to have more credit options and enjoy lower interest rates. One of the other main reasons why people opt for credit cards is to have access to a line of credit.
All these benefits make it tempting to use credit cards and while credit cards can do a lot to improve the quality of one’s life, credit cards can also cause a lot of tragedy. If one is irresponsible with the use of credit cards, the person can end up losing everything and even more.
Here are the dangers of credit card debt:
The Temptation to Overspend
Using a credit card can have some people thinking that it’s “free money”. New owners are more vulnerable to overspending. According to creditcards, college students who use a credit card sometimes charge purchases even though they don’t have the money to pay the bill.
This is a big issue as interest can go higher with each time credit card debt is not paid in full for each month. This means that during the entire college phase, the student can be setting himself up for a lifetime of paying credit card debt.
With a credit card, one can make major purchases such as buying a house or a car. These are huge purchases and not being able to pay for the monthly bills is detrimental to the credit score.
Even with small purchases, one can suffer dire consequences if the balance racks up. Moreover, with each month of missed or unpaid credit payments, your credit score suffers. If your credit score becomes bad or if you become delinquent, you can find it almost impossible to get a new line of credit.
This means that if there becomes an economic struggle and you have a bad credit score, your credit card won’t be of much help anymore. Dangers of credit card debt can be avoided by developing the discipline to pay in full and on time.
Interest Makes It Harder to Pay
While credit cards offer a line of credit, the money you owed from the line of credit needs to be paid in full each month. If one fails to pay in full, a portion of the payment goes to interest making it longer to pay off the balance.
If you keep on charging more on your credit card and you don’t get to pay in full with each passing month, you can end up having a larger debt to pay each month than your income. Before this happens, make sure to take control of your credit card debt.
Do this by paying in full and if you can’t pay in full, strive to not use your credit card too much.
The Impact of Debt on Your Health
Being in debt can have a huge toll on your overall health and well-being. According to thebalance, “debt can lead to stress, depression, other health issues, and in some serious cases, even suicide”.
No one deserves to fall too deep into debt that it becomes irreversible. It’s ideal to know the best ways to use credit cards for you to better know how NOT to use them. As you’ve already learned, the worst things you can do with a credit card is:
- Forget or think it’s okay not to pay credit card payments
- Not paying bills in full
Ruining Your Credit Score
Your credit score says everything about your capability of handling credit card debt. It’s what lenders check to see how much of a “risk” you are. If you have a bad credit score, your ability to charge can be revoked.
Here are more other consequences of having a bad credit score:
- Higher interest rates on credit cards and loans.
- New credit card and loan applications might not be approved.
- Getting denied on getting a job.
- Getting denied for a cellphone contract.
- Getting pursued by debt collectors.
- Higher insurance premiums.
- Harder to start a business.
- Harder to purchase a car.
- Harder to refinance student loans.
Having a low credit score impacts your status in borrowing money and in making big purchases. If you believe that you have the discipline or you can develop the discipline to use credit cards in a responsible manner, then it can pose no danger to you.
It’s even ideal to start using one earlier on to start building credit history. Now that you know the dangers of credit card debt, you are now better aware of what to avoid and not do with your credit card.
Start enjoying the benefits of credit cards by getting one today. Choose from one of the top credit card companies in America. With whatever you do, be responsible with your credit payment.