5 reasons why Credit Card Debt is so Dangerous
For many Americans, credit card debt has become a way of life. Most people start accumulating a balance while they’re still in high school, and a lot of people never get it fully paid off. Unfortunately, this debt is some of the most dangerous debt to carry with you through life. These are five of the top reasons why.
- The interest is some of the highest on the market. Interest rates on credit cards are some of the highest available on the loan market. In fact, many banks charge their customers the maximum amount allowed by law; over 29%. Other options, such as debt consolidation loans, charge a third of that amount.
- It’s hard to budget around. As you make purchases and pay off part of the debt on these cards, it can be next to impossible to predict how much you’ll owe at the end of each month. Instead of one steady payment, you can pay anywhere from a few dollars to thousands. Deciding how much to pay each month is actually a major decision that can have a huge effect on your overall finances.
- Fees can add up quickly. Unlike other forms of debt with cleared spelled out terms and conditions, it’s possible to accumulate fees on credit cards for all kinds of infractions. Late payments, going over your credit limit, and paying by phone are just the beginning of what you may have to cough up money for.
- It can affect your eligibility for other loans. Every penny that you charge on a credit card is tracked by hundreds of banks. If you use too much of the credit they extend to you, your credit score will drop. Unfortunately, every banks has a different limit on the “ideal” amount of debt that they want you to carry. It’s impossible to guess what the right amount is.
- It’s hard to refinance. Refinancing credit card debt can typically only be done by taking out a loan against your house or getting another credit card. Neither one is a great option. It may also be possible, however, to qualify for a debt consolidation loan. These loans are a good way to get everything paid off quickly, giving a person a chance at actually getting out of debt.