What's So Bad About Carrying a Credit Card Balance?

Credit cards can be a great way to purchase items. When you buy something with a credit card, you can earn rewards for your purchase if you've chosen a good card. You may also become eligible for additional perks, depending on the card, such as an extended warranty on your item. Plus, using a credit card responsibly can boost your credit score.

But while you may want to pay for things with your credit card instead of taking money out of the bank, you do not want to carry a balance on your card. You'll always want to pay off the card in full when the statement comes.

Wondering why that's the case and what the problem is with carrying a balance? Here are some key reasons why you should aim to avoid getting stuck with outstanding credit card debt.

You will pay a fortune in interest

The single biggest downside of carrying a credit card balance is that doing so could leave you paying an absolute fortune in interest.

As of August 2023, the average credit card interest rate was 21.19%. Let's say you owe $2,500 on a card that charges you the average rate and that sets the minimum payment at the lesser of 2% of your balance or $25. If you pay only the minimums, it would take you 34.9 years (or 419 total payments) to repay the remaining balance due. During that time period, you would end up paying $11,239 in interest.

The interest costs in this scenario add up to many times the amount you initially paid for your items. The problem is you'll get stuck in debt for a long time if you pay only the minimum due, and your interest rate will be so high that you will pay a literal fortune in financing charges over the coming decades.

You'll reduce the income you have to spend in the future

Remember, in the above example, you would have to make 419 payments on your credit card debt before you would be free of your debt.

If you get stuck making a minimum credit card payment for a shocking 34.9 years, then for the next several decades you will have already committed yourself to spending future income you have not even earned yet.

In every single month that you get stuck paying a credit card bill for past purchases, you're going to have less money left in your checking account to spend on anything else. You could find yourself without the funds needed to save for your future or accomplish anything else you desire because a good portion of your monthly income will still be going toward your decades-old debt.

If you've committed future income to past purchases, you're robbing your future self of the chance to do what you want with the hard-earned money coming in. Instead of having those funds available, they'll be going right out to line the pockets of your creditors.

For both of these key reasons, carrying a credit card balance simply isn't something you should do. Use your credit cards to earn rewards, but try to pay the bill in full each month so you don't end up costing yourself money or your future financial security.