Why Credit Card Debt Is So Toxic
When it comes to financial wellness, credit cards can be one of the more dangerous tools consumers use. If we don’t pay attention to the balance and track our ability to pay off what we put on the cards, it can be dangerous to our financial health. We might be fine today, but in the future we’ll more than likely be in a worse situation.
Credit cards come with some of the highest interest rates this side of payday and title loans. Carrying debt from one month to another on your credit cards can add up in a hurry and put you in a situation where you may have to turn your financial plans upside down to accommodate your past expenditures. The national average interest rate on a credit card is currently 15.16 percent or $15 for every $100 you owe. If you’re not paying your card off in full every month, the compounded interest adds up quickly. Simply paying your minimum payment, usually just 2 percent of your balance, won’t pay off your debt quickly. If your interest rate is on the higher end, it may actually put you deeper in the hole. Compound interest can quickly outpace your ability to pay down your debts if left unchecked for a period of time. If you only pay the minimum payment, it could cost you 9 times the original balance.
Piling up credit card debt is a surefire way to find yourself with a toxic credit card that has to be managed carefully to avoid falling behind. Furthermore, the purchases you bought with your credit cards probably aren’t considered good debt and won’t make you a profit in the future like selling a house might, getting an education or starting a business could.