Why It’s Important To Avoid Building A Big Credit Card Balance

One thing that loans have in common with credit cards (aside from the fact that they are both shades of the same thing), is that they are both easily accessible. More than loans, credit cards are so accessible now than they have ever been. For this reason, some people do not mind having a number of them handy whenever they go out. Others prefer to swipe out their credit cards for petty expenses, even when they have enough cash on them. Eventually, people become almost addicted to credit cards, most especially, what they offer – debt. Depending on how often you use them, credit cards could be that “devil in your closet” when it comes to building a good credit score or raising money for large purchases later, especially when you build up a big credit card balance that never seems to go away.

Here are some of the reasons why it is important to avoid building a big credit card balance.

1. Add To Your Accrued Debt:

For some reason, almost every young American starting life right out of college is in some form of debt. Most likely, they owe student loans. How terrible does that sound to start life with an advanced debt, even before taking on their first job? As if that is not enough, adding a credit card does not reduce your debt but only adds to it. That obviously should be worrying to anyone interested in using credit cards.

2. Ruins Your Credit Score:

This is obvious. Building a big credit balance ruins your credit score big time. Thus, whenever you go in for your insurance or a similar financial facility where premium payments and risk assessments are involved, you are likely to pay higher premiums. The reason for that is that, due to your poor credit score, you become “risky” for them to protect. This also creates an assumption that if you cared less to have accrued such a big credit balance; you are equally going to care less about your home or car maintenance too.

3. Makes You Appear As Extravagant:

One psychological trick a credit card plays on your mind is that it takes away that value we place on paper money, especially when we are losing it. The value you place on those digital figures moving out of your card comes nowhere close to that which you may place on physically moving money out of your wallet. This only lets you overspend. You don’t see the harm in entering a number with a couple of zeros after it.

4. Makes You A Financially Indiscipline Person:

I may not care what you spend your credit card funds on. It may be a life-saving emergency. However, if I should see you owing quite a lot in credit, it automatically changes my perception of you. You suddenly become someone who cannot control his financial desires, irrespective of what you have been spending it on. Depending on who gets this perception about you, it may largely affect you or your relationship with them.

5. It Is Usually Deeper Than You Think:

Financial institutions offering credit cards are not dumb. Most of them know the average person lacks a basic understanding of how credit works. Therefore, they make it seem like “free money” until get deep into it. Some people never bothered to observe how much their interest rates were rising to meet their balances until it was too late. You will not be informed that your 8% annual percentage rate (APR) might get to 29% if you miss payments.

6. Breaks Homes And Ruins Relationships:

I may be wrong, but I strongly believe that issues surrounding finances are usually the most argued about among couples. It is so serious that it breaks homes. People take on debt that simply becomes unbearable and affects their relationships. It gets worse when the debt only keeps increasing. Before long, their marriage or relationship shutters into pieces. 

7. You Can Become Bankrupt:

It is not financially prudent to spend with a budget, especially when you spend from a credit card. Many people are on the verge of filing for bankruptcy, partly because they took on expensive but big credit card loans and they could not come up with any payment plan to pay off all debt until they had to file for bankruptcy. I am sure you don’t want that to happen to you, right?

8. Affects Other Financial Opportunities:

It is easy to save or invest $10,000 a month when your monthly expenses and debt are quite negligible. However, when your credit balance is so big, you are left barely with anything tangible enough to save or invest. In a worse case, you may even borrow more than save or invest. IF this should happen for a long time, you may not become financially independent.

9. Affects Your Self-Esteem:

Sometimes, looking at your credit card debt only makes us appear to be “losers” especially when our mates are either debt-free or excelling financially. It is just shameful to most people to owe money and not be able to pay. It destroys your reputation and self-esteem. 

10. Ruins Your Peace of Mind:

Another major psychological effect or result of carrying bad credit is (and why you should avoid it) is that it destroys your peace of mind. You can hardly focus or concentrate on other positive aspects of your life if all you think about every day is how you got involved in such a mess of debt. This affects your general wellbeing since a healthy soul dwells in a healthy body.

To conclude

Credit cards may not be necessarily bad. However, they are one of the easiest ways to be indebted and inherit a big credit balance. Looking at all the largely negative effects of what a big credit balance could do to you, it is, therefore, necessary to avoid credit cards completely if you can and rather save to pay for whatever you wish to buy.

Some links that may help you

Visit our learn to save section

Try out our financial risk calculator

If you’re in debt and need help visit Step Change, a charity to help with people stuck in debt