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The Dangers and Consequences of Credit Card Debt

Debt is one of those four-letter words people don’t always talk about. It can feel taboo or embarrassing, but if you’re struggling with credit card debt, you’re not alone. According to Experian, a global leader in consumer credit reporting, the average American had $5,313 worth of credit card debt in 2020. That same year, total average consumer debt including mortgages and student loans averaged $90,460 for US citizens. 


Even though there are multiple risks surrounding the use of credit cards, individuals are often tempted to spend what feels like “free money.” Or they are enticed by a generous offer of bonus points or miles. For whatever reason you sign up for a credit card, be wary of these dangers to keep yourself out of debt. If you’re already accrued a large balance, keep reading to learn how to pay it off quickly to get back to enjoying life.

Danger #1

The temptation to overspend


Studies suggest that consumers spend more money when they are paying with credit as opposed to with cash. There’s something about physically handing over bills that is sobering for most people and makes them pause. But the swipe of a piece of plastic is enigmatic and easy.


Credit card companies are not your friend. Yes, no matter how nice customer service may seem, the company’s goal is to make money off its consumers in the form of interest payments. Companies offer different rewards and benefits to motivate you to spend more.


Danger #2

Your credit score can be adversely affected


If you use your credit card for everyday spending and you do not pay it in full each month, you’ll accrue interest. Not only that but using your credit card frequently results in a high utilization rate, which will lower your credit score. Your credit utilization rate is your debt represented as a percentage of your available credit. For example, if your card limit is $5,000 and your balance is $1,500, you’re using 30% of your credit. Using most of your available credit limit negatively affects your credit score, which in turn makes it more difficult to acquire additional credit you may need someday like for a mortgage. Swiping the credit card constantly now, has implications long into the future. Your credit score will also be negatively affected if you miss any payments.


Your credit score can be positively influenced if you employ healthy spending habits with your card such as paying it off monthly or at least maintaining a utilization rate of 30% or less which is the universal standard.


Danger #3

Making only the minimum payment


While making the minimum monthly payment will keep your account in good standing and avoid late fees, you’ll spend more money overall on interest, and it will take you a long time to reach a zero balance again. Making small payments creates a false sense of security in cardholders. If you can’t pay off your card in full, try to make more than the required minimum.


Consequences of Credit Card Debt

The risks associated with credit card debt should not be taken lightly. The consequences are serious as well. If you’re drowning in debt you cannot focus on other financial goals like creating an emergency fund or saving for retirement. If you feel overwhelmed, it may be tempting to ignore the debt altogether but that only makes it worse…a lot worse! These are the consequences for ignoring your debt:


1. Late fees will begin to accrue in addition to the growing interest on the outstanding balance.


2. Eventually, you will be charged a penalty interest rate that is always higher than your usual rate.


3. After 30 days, late payments will start hurting your credit score.


4. The creditor will attempt to collect debt from you.


5. After a few more months, the creditor will send your defaulted account to collections.


6. Your credit score will be affected for 7 years! If you chose to file for bankruptcy, the consequences get worse.


Additionally, having debt also contributes to health concerns. At the very least you will likely be stressed by your financial situation, but some individuals can spiral into depression and more serious mental issues. Those with credit card debt are more prone to heart attacks and insomnia, and in unfortunate cases it is sometimes a factor in suicides.


Getting Out of Debt

If you’ve got credit card debt, it no doubt feels overwhelming. Focus on the long game because getting out of debt certainly doesn’t happen overnight, but with diligence and patience it is possible. 

If your debt is starting to accumulate, ask yourself this: am I using credit as an additional stream of income? How did I get here? What purchases put me outside my means of living? Stop detrimental spending habits immediately!



After identifying the factors that led to your debt, create a budget for yourself and cut costs where you can. With the extra funds you’ve pinpointed, allocate them toward paying your debt. Include “debt” as a line item in your budget. There are plenty of apps and online spreadsheet tools such as Mint or Honeydue that have helped millions of consumers budget themselves. After you’ve created your budget, physically remove the credit card(s) from your wallet or purse and remove saved credit card information on the websites you often shop. Having to physically enter card numbers can give you that pause you may need to make a better spending decision.



Some experts believe you should pay your high-interest credit cards off first. Another popular method of paying down debt is through the “snowball” method where you order your debts from smallest to largest and focus on using any extra money on your smallest debt first to experience a “win.” After your first debt is paid off, you can move onto the next.


If you have more than one credit card, you may be eligible to transfer the balance of one to another, preferably the one with a lower interest rate. There is usually a one-time flat fee based on the amount you transfer.


Another avenue to paying off credit card debt is to meet with a credit counselor. They can help you budget and provide insider tips and tricks. You should meet with a counselor before renegotiating terms with your creditor, which is generally the last step in managing debt. With your new budget in hand and a simple smile, you’d be surprised how many creditors are willing to work with you to manage your debt.


Don’t rush to cut up your newly paid off card, as a closed account can negatively affect your credit score. Closing your cards as they are paid in full reduces your available credit and lowers the average age of your credit accounts. From now on, focus on maintaining strict discipline, but keep that card open. Finding a debt plan that’s best for you is worth the time and effort. Be diligent and you’ll be back to enjoying a debt-free life!

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