Top Ten Signs You May Be in Credit Card Danger.
Most Americans today make at least some use of credit cards, and to be fair, they do have some upside. Most credit card companies offer some sort of “rewards” or “points” system when you use their credit card, which can offset some expenses later on. Further, large purchases can be made more manageable with a credit card, allowing the debt to be paid back in easier monthly payments.
The positive side of using credit cards has been the focus of credit card companies’ marketing efforts for so many years that many people often don't consider the signs they may be in credit card danger.
In just the U.S. alone, there has been an 8% year-over-year growth in credit market size between 2019 and 2020, in line with previous years' trends, according to estimates of the value of transactions conducted with credit cards.
Additionally, market share grew slightly during the first year of the pandemic, so it continues to be the most relied-upon payment method in the United States. By 2025, estimates say the country's credit card penetration will reach over 65 percent.
Though paying through credit cards provides some benefits and convenience, it would be wise to remember the associated credit card danger.
Understanding these potential risks will enable you to make wise decisions about your finances and ensure that you use credit cards responsibly.
People generally associate credit card danger with financial risks or damages. However, most never realize that credit card debt can have long-term effects beyond a person's wallet. We ignore this aspect at our peril.
A recent study has shed light on the fact that carrying a large amount of credit card debt can lead to elevated stress, anxiety, and depression. In addition, it can also impact an individual's physical health, leading to higher blood pressure, an increased risk of heart disease, heart attacks, insomnia, and explosive emotions.
These risks can start early. Indeed, many people obtain their first credit card when they enter college. As stated before, studies demonstrate that debt-related financial issues can lead to depression, which, in turn, has been linked to diminished study habits, decreased academic performance, and higher rates of student attrition. In some tragic cases, the distress caused by credit card debt has been a contributing factor in the suicides of college students.
Where many people get into trouble is when they “carry” a high credit card balance from month-to-month. Not only will you be subject to expensive interest charges, but you may also be putting yourself at risk of having your card declined.
Furthermore, maxing out a card and running a high balance can cause severe damage to your credit score and limit your ability to apply for new credit cards or loans in the future.
Ultimately, it is best practice to pay off as much of your monthly balance as possible and work to keep your credit utilization low.
Using credit cards can reduce your future purchasing power if not appropriately managed. It reduces your future buying power by reducing the amount of credit available to you.
Moreover, if you spend too much now, you are allocating a portion of future earnings toward past purchases. Many people use credit cards to make too many “big ticket” purchases before the previous balances are paid down, resulting in high monthly minimum payments. Later on, when a larger and larger chunk of their paycheck is going right to the credit cards, ordinary purchase like food, gas or clothing – purchases that might otherwise have been paid for with cash – are now financed through a credit card. This, in turn, exacerbates the issue.
It is essential to focus on proper debt management; otherwise, be ready to face serious financial problems.
Applying for too many credit cards at a time can be a significant pitfall in using credit cards. When you apply for several credit cards in a short period, it can hurt your credit score. Additionally, the more cards you have, the higher the chance of overspending or missing payments, which can incur hefty fees and an exploding interest rate.
It is a must to use credit cards responsibly to maintain and build a good credit score. Research the different types of credit cards and use them mindfully to find the best one.
One of the consumers' most common mistakes when using credit cards is neglecting to review their billing statements. Often, people are too busy to even think about their billing statements, or they’ve gone “paperless” and monthly statements get lost in a sea of junk email. The result is that people are unaware of costly fees and expenses until it is too late.
Consumers should always double-check their statements for any discrepancies or unexpected charges. If you do not dispute an unauthorized charge in a timely manner, that charge will be assumed to be yours. Reviewing your credit card statement will also help keep you cognizant of your spending habits, and provide an early warning if you are spending your way into credit card danger.
Missing a payment is a top credit card danger you need to avoid. According to FICO's analysis of credit scores, if an individual fails to make a payment before the 30-day mark, their FICO score can drop by an estimated 17-83 points. An unpaid bill in arrears for 90 days has an even more significant impact, with a decline of 27-133 points. Staying on top of payments is key to maintaining good credit and avoiding potential credit card danger.
To secure timely payments, consider setting up autopay. Use calendar reminders and email notifications if this option doesn't suit your needs. Whatever you do, be sure to make those payments on time!
Credit card fraud is an increasingly prevalent problem that one can face. Skimming cards at point-of-sale terminals, ATMs, and online methods such as phishing emails or phone calls are all possible ways criminals can obtain access to credit card details.
Additionally, identity theft is a serious concern, as criminals can use personal details to obtain a new card. You certainly don’t want to pay for someone else’s new home-theater system.
A key way to avoid this potential credit card danger is to thoroughly review each monthly statement as soon as it comes in.
Consumers who find themselves getting in over their head sometimes delay payment to one creditor so they can pay the other. This can backfire drastically, resulting in a debt spiral, with interest charges piling up and brutal fees being assessed. Your credit score will plunge, making approval for mortgages, car loans or student loans more difficult – and expensive – in the future. Be sure to maintain regular payments on all debts each month.
Credit cards can be a useful tool, but you must wary of the potential danger. With costs rising everywhere and with today’s credit-card-friendly technology, it is exceptionally easy for people to build more debt than they can handle.
You need to be careful about everything! Make certain you know your credit card’s interest rates, associated fees with the card, and your spending limit.
If you are not careful and spend beyond your means, you can quickly find yourself sinking in debt. This can lead to the biggest credit card danger of all…
Credit card companies file thousands upon thousands of lawsuits every year all across the country. Pennsylvania is certainly not immune. Once you have been sued, your options will start to dwindle quickly. If a credit card company obtains a judgment against you, they will have the ability to place a lien on your home and can drain your bank account almost without warning.
The upside? You have defenses! If you’ve been sued by a credit card company, you need an attorney with experience in fighting back. The worst thing you can do is to do nothing.
Everyone knows the convenience and flexibility that credit cards provide. However, there is an associated cost if you fail to manage or use them properly.
Everyone needs to assess all the pros and cons of using a credit card instead of focusing only on the advantages. Understanding everything about credit and its implications is, in fact, a key to protecting yourself from facing costly credit card dangers.