Credit cards are among the most convenient financial tools today. Most offer perks like great bonuses and immediate access to cash. Then there’s the exhilarating feeling that comes with purchasing anything you need by swiping a card.
However, some people do not understand that a credit card limit is a loan that needs repayment. Therefore, credit cards pose risks that can seriously threaten your finances. Being informed and responsible about your spending is always the best policy when using credit.
But what happens if you are anything but in control of your debt?
The dangers of credit card debt are immense. You could fall into a big financial crisis if you misuse your credit cards and fail to pay your debts on time. It’s imperative to understand the pitfalls of accruing credit card debt to comprehend the blowbacks it can have to you.
Let’s explore common risks associated with credit card use.
The Potential to Ruin Your Credit Score
How you handle credit cards can influence your credit score. Complying with the set rules can massively build your credit score. However, the opposite can be true when you don’t, as credit cards can ruin your credit score if you overstretch your limit or delay your monthly payments.
One disadvantage of a poor credit score is that it can make you lose a vital career opportunity as some employers run credit checks before hiring. And since your credit score may determine if you qualify for loans from major mainstream lenders, you might not be eligible for the same.
It’s best to minimize your credit card use and ensure you pay your debts on time to avoid a bad credit score. Also, strive to use no more than 30 percent of the credit card’s limit.
Financial, Emotional, and Physical Distress
The dangers of credit card debt can be so devastating, with the potential to cause anxiety and stress. That can affect your mental and physical health. It could cause regular headaches due to overthinking, low energy, and poor appetite.
The frequent email reminders and endless calls from debt collectors can make people consider themselves failures. Besides, they remind you of your financial trouble and may aggravate your mood. That’s why it’s imperative to manage your debts on time.
If you’re experiencing stress due to credit card debt, there’s hope for you. Companies like Freedom Debt Relief help clients manage their financial debts by negotiating for a lesser repayment than the debt they owe.
High Compounding Interest Rates
Credit cards are notorious for having the highest interest rates in the debt sector. Usually, credit card lenders utilize the compound interest principle to determine interest. That can cause you to pay way more than the original amount you borrowed.
Additionally, failing to pay your credit card debt payments on time can attract more interest on your loan, making it improbable to meet your monthly target. The aftermath is the accrual of a huge credit card debt you can’t finance.
Consider setting an automatic pay system or phone and email reminders to avoid missing your monthly payments. You can also request your lender for lower interest rates or make several payments a month.
The Inability to Meet Financial Goals
Every person has different financial goals. However, credit cards can cause you to spend more money than intended. Various researchers state that most people spend more money using credit cards than cash.
That can make you have less or no cash left to save to meet your money goals. It’s wise to create a realistic and reasonable budget based on your financial capability and stick to it to avoid overspending.
The Bottom Line
Now that you’ve understood the dangers of credit card debt, it’s your chance to make better financial decisions. If you find yourself stuck with credit card debt, you can always contact Freedom Debt Relief for financial counsel management and services.
The company has over 15 years of experience helping its customers resolve credit card debt crises by negotiating for the best possible solutions. Financial freedom and a debt-free life are within reach!