How Does Credit Card Debt Lead to Financial Stress?
Even after the Credit Card Act of 2010, carrying credit card debt is like building your financial security on shifting sand. Credit card companies can still hike up interest rates--they just have to give you 45 days' notice. And there is no cap on interest rates or any restrictions on new fees.
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Interest
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Carrying credit card debt means that less money is available for securing your financial future. High interest credit card debt means that your money is going toward paying interest instead of being saved or invested.
Credit Score
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Credit card companies monitor your credit score. Having high balances on credit card accounts will lower your credit score, making financing a car or a home more expensive through higher interest rates.
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Sales and Discounts
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Interest charges and fees can add up to big money. You stay within your budget by purchasing things on sale or getting a discount, but you charge purchases to a credit card that's carrying a balance. Interest charges and fees can wipe out your initial savings and blow your budget.
Universal Default
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You might think that you have your finances under control, but one slip-up could send you on a financial rollercoaster. Prior to the Credit Card Act of 2010, a credit card company could raise your interest rate if you were late to any creditor, even if your payments to them were on-time. That has technically changed, but not by much. Now they can cancel your card and demand payment of the balance in full.
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