CREDIT CARD DEBT AND HOW IT CAN MAKE YOU POORER
- Posted on November 30, 2019
- Featured Advice
- By admin admin
Debt results when a client of a credit card company purchases
an item or service through the card system. Debt accumulates and increases through
interests and penalties when the consumer does not pay the company for the
money spent.
Debt is easily justifiable because it seems like everyone is
dealing with debt of some kind. If you have student loans or a car loan, you
may even feel like the debt was justifiable. However, debt can hold you back
and limit the things you are able to accomplish. If your debt to income ratio is higher than 25 percent, you may be in serious danger and your debt
can do some real damage to you
According to Nerd Wallet's annual analysis of U.S. household debt,
Credit card balances carried from month to month continue to inch up, reaching
$435.9 billion halfway through 2019. That’s an increase of more than 5% over
last year. And for Americans carrying that debt, the impact is significant. The
average U.S. household with credit card debt has an estimated $6,829 in
revolving balances, or balances carried from one month to the next, the
analysis found. This pernicious type of debt, which often comes with high-interest rates that make it a challenge to pay off, can feel inescapable. About
1 in 11 (9%) Americans who have credit card debt say they don’t think they will
ever be completely free of credit card debt, according to a Nerd Wallet survey
conducted by The Harris Poll.
How credit card debt can make you poor
·
It lowers your credit score
Your credit score is
determined by a number of factors and the amount of debt you have is one of
them. If you have too much debt or if you are using too high a percentage of
your credit cards, you will likely have a lower credit score. This, in turn,
can make it difficult to borrow money and get a better interest rate on your
money. Part of your credit score, exactly 30%, is based on the amount of
debt you have. The more debt you have compared to your credit limits and
original loan balances, the lower your credit score will be.
·
Getting a job becomes difficult
There are some jobs that
require a credit check. This is usually part of the interview process, but
depending on the field that you are working in, this can create a difference
whether or not you find a job. If you have a large amount of debt, you may be considered
a greater risk to handle certain assets within the company or for customers.
·
It Prevents you from
kick-starting your dream business
Too much debt can affect your
ability to open a business in two ways. Firstly, it prevents you from being
able to borrow capital in order to open the business. Many banks are reluctant
to give small business loans to consumers that are already carrying a lot of
debt. Additionally, it may make it more difficult for you to take the risk or
make the next step if you are worried about how you are going to cover your
bills and stay current.
·
It prevents accomplishment of
financial goals
Monthly debt
payment can limit the amount of money you have
to spend on other things, not just retirement, but the trips or vacations
you've always wanted to take. The more debt you accumulate, the more your
monthly payments will be, and the less you have to spend on everything else.
·
The high interest cost can be
derailing
If you buy a $2,000 living
room set on your credit card at 11% and only make the minimum repayment,
you’ll end up paying more than $3,400 by the time you completely pay off the
debt. That’s $1,400 more than the furniture cost. Even if you raised your
monthly payment to $100 and paid off the balance, you’d still pay close to $220
more than the cost of the furniture.
Be the first to comment!
You must login to comment