3 Consequences of Carrying a Credit Card Balance

Here's what could happen if you rack up credit card charges you can't pay off.

Americans owe a collective $807 billion on their credit cards. That's just one of many shocking statistics uncovered in a new research report by The Ascent. But on an individual level, that breaks down to an average credit card balance of $5,897.

If you're sitting on credit card debt, you might assume it's no big deal -- especially if you keep making your minimum payments. But here are some consequences to carrying a balance for a long time.

1. Obnoxiously high interest charges

Credit card issuers don't allow you to carry a balance out of the goodness of their hearts. Rather, they make money by charging you interest. And the longer you carry a balance, the more money they stand to make.

Imagine you owe $6,000 on a credit card that charges 18% interest. If it takes you five years to pay off that debt, you'll wind up losing $3,142 to interest. If you carry that balance for seven years, you'll be looking at $4,593 in interest. It's easy to forget about those charges when you're solely focused on making minimum payments. But don't fall victim to that trap -- unless, of course, you enjoy throwing your money away.

2. Credit score damage

Carrying a hefty credit card balance could damage your credit score, making it more difficult to borrow money when you need to. That's because a high enough balance could raise your credit utilization ratio, which measures the amount of revolving credit you're using at once.

To avoid credit score damage, your credit utilization ratio should not exceed 30%. This means if you have a total credit line of $10,000, you'd need to keep your balance to $3,000 or below. The problem, however, is the longer that debt goes unpaid, the more interest charges you rack up. These, in turn, raise that ratio -- which hurts your credit score.

3. Added stress

Being in debt is stressful. And too much stress could actually be harmful to your health. A credit card balance could be exceptionally devastating if you lose your job or your income takes a hit. It means you'll have yet another monthly bill to contend with.

Pay off that balance

If you're sitting on a credit card balance, coming up with an efficient payoff plan will help you shed that debt more quickly. To this end, see if you qualify for a balance transfer, where you move your various balances onto a new credit card with more favorable terms. Doing so could lower the interest rate you're paying on that debt -- especially if you snag a 0% introductory APR offer. Be aware that you may need to pay a balance transfer fee and, if possible, try to plan to pay the debt off before the end of the introductory period.

Another option is to take out a personal loan and use its proceeds to pay off your credit card(s). You'll then be able to pay off that new loan at a fixed rate over time. Personal loans usually charge a lot less interest, so it could be a more cost-effective way to whittle down that debt.

Racking up a credit card balance may not seem like a big deal, but it is. Keep that in mind the next time you whip out a credit card to charge an expense you know your paycheck can't cover.