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Personal Finance
September 22, 2015
By Jack Ryder

The Crippling Consequences of Credit Card Debt

Simple. Thrifty. Living.

You just received your brand-new $10,000 credit limit VISA card, so it’s time to go shopping, right? Not so fast. Credit isn’t free, and there are strings attached. Using your credit unwisely can cause more problems with your finances in the future.

When you received your credit card, you probably weren’t thinking about monthly payments. Credit cards can offer a sense of freedom, but if you can’t afford to make a purchase with cash right now, there’s a real possibility that you won’t be able to pay the credit card balance when you receive your monthly statement. You do have the option of making just a minimum payment, but minimum payments lead to ridiculously high interest charges. It can take years to pay off your debt by paying just the minimum, and the item you bought will end up costing several times what you would have paid in cash.

Once you’re ensnared in the quicksand of minimum payments, you open yourself to the possibility of being unable to afford a monthly payment. It’s an embarrassing moment that can have far-reaching consequences. Credit card companies religiously report missed or late payments to the credit reporting agencies, and this is tied to your credit score, where it will remain for a seven-year period. Every time there is a late or missed payment, your credit score is adversely affected. Auto and mortgage financing rates are all dependent upon your credit score. The lower your score, the higher your interest rate for future loans, making everything you want to buy in the future more expensive than it has to be. If your credit score has already taken a hit, here are some ways you can improve it.

Although missing a payment or making late payments may not seem to have a negative impact on your daily life, there is a hidden danger to a low credit score. Quite often, prospective employers use a credit check as part of the hiring process. Along with your resume, a credit check is used to evaluate a potential employee’s character. Your resume may attest to your knowledge and expertise; however, an employer will also want to know that you’re a responsible, dependable person. A credit file riddled with negative information can be damaging to your future opportunities.

That feeling of elation when you receive your shiny, new credit card? Go ahead and bask in the moment, but before you rush out to swipe and spend, remember that freedom comes with responsibility. A healthy credit score is key to maintaining a life of prosperity and opportunity, and mismanagement of credit card debt can have far-reaching, crippling consequences.

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