If you are carrying a balance every month, then this is a sign that you are spending more money than you can afford. Credit cards tempt people to buy things that they cannot afford. A credit card allows you to buy something that you cannot afford and pay for it later. However, this will eventually catch up with you.
Double-digit Interest Rates
High interest rates are one of the reasons that people struggle with debt. Many credit card companies charge interest rates that are in the double-digits. That is why if you are only making the minimum payment, then it will take you a long time to get out of debt. If you look at your credit card statement, then it will give you an estimate of how long it will take you to pay off your credit card.
Here is an example of how long it can take you to pay off your credit card debt:
The balance on your credit card is $6,000. The interest rate is 20 percent. The monthly payment is $150. It will take you almost seven years to pay off your credit card debt. You will also have to pay nearly $4,000 in interest. Many people opt to apply for debt settlement programs because of the high credit card interest rates.
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You Will Have a Problem Meeting Your Other Financial Goals
If you are making payments on your credit card, then it will be harder for you to meet your other financial goals. For example, you will have less money to put towards retirement and your emergency fund. You will also have less money to spend on the things that you want such as vacations.
It Can Hurt Your Health
Your credit card not only hurts your finances, but it can also hurt your health. It is hard for you to not worry if you have to make payments. Worry and anxiety can increase the risk of ulcers, depression and heart attacks.
Hurt Your Relationship
Money is one of the top things that people fight about in relationships. Your finances will likely be hurt if you have to make credit card payments every month. That is why credit card payments can lead to relationship problems.
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Hurt Your Credit Score
Your credit utilization rate is one of the factors that affects your credit score. If your balance is more than 30 percent of the limit, then your credit score will take a hit. This can make it difficult for you to get a loan or a home. It can also make it difficult for you to get a job or auto insurance.