Stop the Swipe - Five Reasons Not to Abuse Your Credit Cards

The satisfaction derived from fulfilling our needs and wants is huge in America. Thus, many of us thrive on materialism, feed into commercialism, and are drawn in by the latest and greatest gadgets. We also tend to get caught up in the excitement of the holiday season. While spending freely is satisfactory for those who can afford it, the reality is that overspending and living beyond one’s means has serious consequences. Let’s pretend you have debt. Here are five reasons why runaway holiday spending should be reined in and why freely swiping the credit card must be curtailed:

1. Too much debt can affect your credit score and make it harder to secure new loans or credit cards. While some spending is good for your credit, lenders will examine debt-to-credit ratio. Per Equifax, they like to see a credit ratio of 30 percent or lower. If it is higher, it could signal to a lender that you’re a riskier buyer who may have trouble paying back a loan and your credit score, a three-digit number designed to represent the likelihood that you will pay bills on time, can suffer. Higher credit scores typically represent responsible credit behavior and less risk for lenders.
2. Too much debt can make meeting monthly obligations difficult or impossible. In return, it may cause you to skip or make late payments. This can lead to negative consequences. For example, if you default on a car payment, generally failing to pay for 90 days or more, a vehicle may be repossessed. Should you fall behind on your mortgage payments, you will incur late fees, thereby increasing your debt. And, if you are generally 120 days or more behind in mortgage payments, legal foreclosure may likely begin. Failure to pay bills on time or meet minimum requirements can not only wreak havoc on your finances, but it can drastically lower your credit score. Worst case scenario, you may have to cut back on essentials, such as food or heating, which is dangerous.
3. Too much debt can make it hard or impossible to save for the future. Per the 50/30/20 rule of thumb, 20% of one’s income should be dedicated toward savings. Money going toward paying off debt ultimately lowers the amount that you can put into savings. This can harm emergency and retirement savings goals. Here’s another point to keep in mind regarding credit card debt. Not only will you pay the principal, defined as the initial balance you charged, but you’ll also be responsible for interest, the cost of borrowing the principal. Thus, credit card debt that you carry makes what you purchased more expensive than the original price of the item due to the interest you’re also paying.
4. Too much debt can force you to work longer and harder. Those who struggle to pay off debt often need to increase their hours or pick up side jobs to make ends meet. Not only can this lead to fatigue and burn out, but it can have damaging impact on one’s social life and relationships, robbing one of valuable time spent with friends and family. WebMD states that financial stress may also lead to unhealthy coping, such as overeating, smoking, or use of alcohol or drugs, which makes the cycle worse. And, if you are forced to get less sleep than required, it can have a negative cumulative effect on one’s wellbeing.
5. Too much debt can have adverse health impacts, particularly causing mental trauma. This includes increased stress, anxiety, depression, and conditions such as chronic headaches and high blood pressure. WebMD defines financial wellness as the ability to fully meet your monthly related needs currently and later in life. They stress the importance of financial literacy and the importance of creating and using household budgets and speaking to experts before making large purchases. WebMD describes the link between mental health and financial wellness. “Experts have found that stress from money problems tend to be chronic, or long lasting. They also found that financial issues are the top source of stress for most people – even more stressful than politics, family, and work.” Thus, it’s better for your health to avoid creating negative financial situations.

The bottom line is that financial wellbeing affects all aspects of life and thus is a high priority. Folks are called to be responsible with use of credit cards to decrease wasteful spending that can lead to debt and ultimately open the doorway to financial insecurities. Before you freely swipe that credit card and knowingly take on debt, understand your actions and the consequences, and be prepared to accept full financial responsibility. Remember that financial stability offers many great benefits, including the opportunity to achieve excellent credit to secure loans and buy homes and cars. It also provides the ability to pay bills on time to meet obligations, increasing one’s capacity to save for emergencies and for the future. And possibly the best reason to stop carelessly swiping credit cards is for the enormous health benefits it offers in terms of more stability and less stress associated with good credit.