The 5 Biggest Dangers of Credit Card Debt

Worried that your credit card debt is rising too quickly? Wondering how you'll ever pay off your plastic? You're far from alone. Many Americans who carry balances on their credit cards struggle to pay it off.

According to a 2017 household debt survey by NerdWallet, American households that have credit card debt owe an average $15,654 on their cards. Carrying balances that large can put a huge strain on your finances. And because it's credit card debt, it tends to have even higher interest costs than other types of debt.

Here are the five biggest dangers of carrying credit card debt, and why paying it down is so important. (See also: 6 Scary Facts About Credit Card Debt)

1. It grows too fast

The biggest problem with credit card debt? The high interest rates. It's not unusual for credit card companies to charge interest rates of 20 percent or more. Then, if you don't pay off your balances in full each month, they grow too quickly to keep up with.

Many consumers make the mistake of only making their minimum required payment each month. When you have thousands of dollars of credit card debt, though, doing this means that you might never chip away at enough principal to pay off your balance.

Here's an example: Say your credit card balance is $8,000 and your interest rate is 18 percent. If you make only your minimum required payment each month, it would take you 320 months — or more than 26 years — to pay off your debt. And during this time, you'd pay more than $11,420 in interest. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)

2. It will damage your credit score

Having too much credit card debt will lower your credit score. According to, 30 percent of your credit score is based on your credit utilization ratio. That's how much revolving debt you have — including what you owe on your credit cards — compared to how much available credit you have. The higher your credit utilization ratio, the more likely it is that your overall credit score will suffer. And if your score is too low, you'll struggle to qualify for new credit and loans.

3. Missed credit card payments are even tougher on your credit score

Missed payments have a disastrous effect on your credit score. One late payment — which is noted on your credit reports once it's 30 days past due — can send your score tumbling by 100 points or more.

Even worse, late payments remain on your three credit reports (maintained by TransUnion, Experian, and Equifax) for seven years. Every time you apply for a new loan or credit, lenders and banks will see that missed payment, which might make them leery of loaning you money.

4. Your wages can be garnished

You can't go to jail for not paying your credit card debt: The United States does not have debtor's prison. But that doesn't mean that defaulting on your credit cards won't come with financial pain. Your creditors can sue if you don't pay your debt. And if your creditors win, they can garnish your wages to force you to pay back what you owe.

5. It can keep you from building a financial safety net

Building an emergency fund is a key step in protecting yourself from unexpected expenses. If a major, necessary cost suddenly pops up — say your hot water heater breaks, or your car needs a new transmission — you can pay for it with cash. Ideally, you should have from six to 12 months' worth of expenses saved up in your emergency fund. If you need $3,000 a month to live, you should have between $18,000 and $36,000 in your emergency fund.

It can be tough saving up this kind of money. If you're paying off thousands of dollars of credit card debt at the same time, it's even more challenging. It's difficult to put $300 or more into an emergency fund every month when you also need to devote hundreds of dollars to your credit cards. And because credit card debt comes with such high interest, you really should focus on paying that debt off first. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

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