3 ways carrying a credit card balance can hurt you

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Sometimes even the most responsible credit card users find themselves with a balance they can’t pay by the time their bill comes due. Maybe you could have a month where your spending is higher than you expected. Or, like many people, you may be tempted to make a sale and go a little too far on a shopping spree.

But while it’s not uncommon to have a credit card balance, it’s not the healthiest thing to do either. Here are some ways a credit card balance could hurt you.

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1. It can cost you money in interest

Anytime you fail to pay your credit card balance by the time your bill is due, you sign up to pay interest on the portion you defer. Now if you end up having, say, a balance of $ 250 on a credit card for three months on a card that charges 20% interest, the damage won’t be that bad. In fact, all things considered, your interest charges will amount to just $ 5.

But if you hold a larger balance for a much longer period of time, the interest on the credit card gets worse. Suppose you accumulate a credit card balance of $ 2,000 that takes you 18 months to pay off at 20% interest. In this case, you will end up losing $ 291 in interest charges, a far cry from just $ 5.

2. It can lower your credit score

Having a credit card balance could increase your credit utilization rate, which is a key factor in calculating your credit score. Your credit utilization rate indicates how much credit available you are using at the same time, and the higher this ratio, the more damage your score could take.

Of course, if your credit score takes a hit, it could become more difficult for you to borrow affordably when you need it. And you may also be turned down from credit card offers that interest you, such as those that offer generous sign-up bonuses or additional cash back rewards on your purchases.

3. It can cause you a world of stress

Some people just don’t like the idea of ​​owing money or being in debt. If you are one of them, a credit card balance could increase your stress levels and impact not only your mental health, but your physical health as well.

How to Avoid Carrying a Credit Card Balance

If you regularly use credit cards, your best bet is to pay them off every month. To increase your chances of achieving this:

  • Stick to an official budget that describes your various monthly expenses rather than spending money freely.
  • Keep tabs on your credit card spending by logging into your accounts every week rather than waiting for your statements to arrive to see how much you’ve charged.
  • Have money in the bank for unexpected expenses so you don’t have to take out your credit card to cover unforeseen bills.

With the right strategy in place, you can avoid having a credit card balance – and the negative repercussions that come with it.


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