3 Ways Too Much Credit Card Debt Can Hurt Your Finances

A woman looking over her bills with a laptop and notepad at her kitchen table.

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It's always best to keep your credit card debt to a minimum. Here's what could happen if you don't.

Some people wind up in credit card debt when too many surprise bills strike. Other times, credit card debt is something that slowly but surely builds over time, to the point where it becomes less and less manageable.

As a general rule, it's best to not accumulate any amount of credit card debt at all. The more of it you accrue, the more money you'll lose to interest charges.

But that's not the only problem with credit card debt. Here are a few ways having too hefty a balance could harm you financially.

1. It can leave you with a higher mortgage rate

The more credit card debt you have, the higher your credit utilization ratio is likely to be. That's the ratio that measures your existing revolving debt relative to your total credit limit. Once that ratio exceeds the 30% threshold, it can result in credit score damage. For example, if you have a total credit limit of $10,000 and you owe more than $3,000, you risk negative consequences. That, in turn, can make borrowing more expensive.

If you're looking to buy a home, having too much credit card debt could leave you with a lower credit score -- and make it so you get stuck with a higher mortgage rate. Also, if you have too much debt, to the point where it monopolizes too much of your income, a mortgage lender may deny you a mortgage altogether.

2. It can make a personal loan more expensive

Just as you're likely to get stuck with a less favorable interest rate on a mortgage when your debt load is huge, so too might the same thing happen with a personal loan. In fact, since personal loans are unsecured -- meaning, they're not backed by a specific asset -- lenders rely heavily on borrower credit scores to determine what interest rates to give out. But if a massive pile of debt drags down your score, it could mean paying a lot more to borrow.

3. It can cause you to lose out on lucrative credit card offers

There are plenty of credit cards out there that offer attractive rewards programs and sign-up bonuses. These can put extra cash in your pocket, but if your high level of credit card debt causes your credit score to drop, you may not qualify for those offers. If anything, you're more likely to get stuck with a credit card that offers fewer rewards and charges a higher interest rate on new balances.

Get out of debt

If you've somehow worked your way up into a huge pile of credit card debt, don't despair. Instead, try whittling down that balance as quickly as possible.

Set up a budget so you can carefully track your spending, and cut back on as many expenses as you can to free up money to pay your debt off. You might also consider getting a side job to drum up extra cash that can be used to pay off your debt.

At the same time, see if you qualify for a balance transfer, which will allow you to move your existing credit card balances onto a new card with a lower interest rate. That, in turn, will make that debt easier and less expensive to get rid of. And the sooner you do that, the less of a hit your personal finances will take.

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