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    How Credit Card & Its Debt Can Ruin Your Financial Life


    Getting credit cards is simple and accessible able in today's generation. Even the younger generation who just enter college have easy access to credit cards (Those credit card companies want to take advantage of the inexperienced youngster). According to a recent study, the average credit card debt among U.S. households is approximately $5,700. 

    I have to admit that having a credit card can be an incredible tool such as building credit, cashback rewards, and point rewards that can be used for traveling and souvenir exchange. Nevertheless, the question is, does anyone know that getting into credit card debt can ruin your financial life. I'm talking about digging yourself into a bottomless hole and unable to get out of the financial mess. The amount of debt that can pile up throughout your life can create a severe problem. Credit card companies don't have your best interest in mind. After all, they are in this business to make a profit.

    I believe how you handle your credit now can have massive ratification on your financial future. If you don't use it wisely, you will be stuck in the vicious cycle for the rest of your life. I wrote this article, hoping people will not entangle in this financial situation. Moreover, I do not want people to realize this problem later on when it is too late. In this article, I will explain how credit cards and their debt can ruin your life. I would also tell how not handling debt-related issues can leave you open to worse financial effects down the road.

    1. Credit Cards Fuel Temptation (Does Not Teach Self-Control).
    When you have a Credit Card in your pocket, it is like you have cash in your pocket. But you have to realize that the credit card you have is not real cash. It's just cash that you are borrowing, and you have to pay it back. Without a credit card in our pocket, we aren't tempted to spend money we do not have. We are also better at distinguishing between our needs and our wants. I believe It's a lot harder to spend real cash than simply swiping your credit card.

    An unwillingness to exercise self-control when it comes to money can rob you of financial security. When you have an impulsive attitude toward using credit cards, you can have a negative impact on other areas of your life, including self-esteem, substance abuse, and interpersonal relationships. I believe in purchasing things with cash instead of using a credit card. 

    I have seen many people with credit cards and use them irresponsibly. Since credit cards are easily accessed, many people turn to their credit cards for a solution instead of budgeting and spending money responsibly. Those who use credit cards as an easy way to ignore they are actually in debt usually found them in financial trouble. They end up needing to keep relying on using credit cards to pay their expenses, and without them, they are unable to do anything. This usually results in them being trap in the vicious cycle of the rat race


    2. Those Credit Card "Reward" is a Tactic to Make You Spend More.
    The reward from a credit card can be delightful, but be wary that those rewards are far less than the extra interest you'll accrue if you cannot pay off the money you spend to earn such bonuses. The credit card reward schemes that allow you to earn points on your credit card purchases come out to a reward of 2% or less. 

    For example, you may receive one point for each dollar that you spend, but you must redeem 10,000 points to get a $200 discount on a traveling ticket. Because the amount of interest charged on outstanding account balances exceeds the 2% bonus that you received, it's not worth it in the end. You are practically on the losing side, and the credit card companies are making huge amounts of money from unknowledgeable people. Moreover, besides, if you really want to get into a rat race and achieve your financial freedom, you do not want to be spending money; instead, you want to accumulate your savings to invest in assets that generate cash flow for you. 

    Credit card companies are smart with making people believe they are benefiting from using credit cards. They give a reward system to customers so that they keep sticking to using credit cards. Remember that no multi-millionaires or someone wealthy said they are successful financially because they used the reward system that credit cards provide. 

    I was able to build wealth because I always avoided credit cards. It is not because of the reward system that credit card companies gave for using their services, but it's because I set a budget and stick to an investment plan towards my financial goal. Do not get fooled by the rewards that credit card companies use to keep people using their service. This is just a marketing technique so that people will keep spending and be irresponsible with their finance. 


    3. You Have to Pay Back What You Borrow (Sometimes with Huge Interest Rate). 
    Sometimes swiping your credit cards for every purchase can be so simple, especially when you know you can pay it back with the minimum payment. However, you have to understand that these are not your money and you'll need to pay it back. And if you pay with just minimum payment, you'll be charged interest on the amount you still owe. The credit card interest rate is high, which makes your purchases more expensive. If you don't have the money to pay cash for something in the first place, you probably don't have to make it more expensive by adding interest to the price.

    If you buy merchandise for $1,000 using a credit card with an 18% interest rate and only make the minimum payment each month, you will end up paying $175 in interest after one year and still owe $946 on your purchase. This shows how expensive it is to use credit cards to purchase things with money you don't have. The interest rate that credit card provides only benefit themselves and none for the people who use them. 

    I would highly recommend you not to do that. Not only will you never pay off your bill, but the interest rates that credit card companies charge will actually keep your bill growing every month. Remember, there is no Free Lunch in this world. You might be able to get the thing you want; however, that thing you purchase can cost your financial life ruin. Don't be tempted to buy something when you don't have the cash to purchase it. It is better if you delay your gratification when deciding you want to buy something. This can prevent you from making a stupid financial decision that can ruin your financial life.


    4. Credit Card Comes with Costly Opportunity Cost.
    You know the power of compound interest from my previous article. It can work for us or against us. But using Credit Card is using it against us. When we make credit card payments, this money goes not just to stuff we have already spent. We are also paying interest—often up to 21%! Nevertheless, if we redirected that monthly $100 payment into a good growth stock mutual fund or a Roth IRA for 40 years instead, we would have more than $1 million! I am super serious! 

    No matter how appealing marketing from those credit card companies, their purpose is to make money out of you. They are not designed to add value to our lives but instead subtracting from you. I believe if you want to spend on something, pay it with real cash (money you have). I was always able to avoid getting into debt because I have always stayed away from credit cards. I used the power of compound interest to my investment plan. This way, I can have my money work for me rather than having myself work for money to pay those interest expenses. 


    5. If You Pay Late, You Get Penalty.
    No matter how careful you are, we as a human being who can make mistakes. I myself, who is pretty organized with myself, can make a mistake. If you pay your credit card late even just for one day, you'll be charged $25-$35. Moreover, if you continue to miss the due date, you can incur an additional late fee. 

    Also, paying late will increase your interest rate, often resetting your interest rate to a penalty. Interest rates are causing the balance you owe to grow every day. If you miss a payment or two, the interest rate itself may even increase under the terms of your credit card agreement. For credit cards, the penalty APR can be as high as 30%, which means you will pay significantly more in your outstanding debt balance. Furthermore, paying late might decrease your credit score. Payment history information typically accounts for nearly 35% of your credit score, making it one of the single most important factors in calculating your score. Just one late payment can drastically lower your credit score, especially if you have a good or excellent credit score.

    If you are using credit cards, always remember to pay it on time. If you do not want to go through this hassle, it is best to use a debit card. It has the same functionality credit cards provide. I have always avoided using a credit card in my life; instead, I use my debit card. I can utilize the functionality a credit card provides, but without putting myself into debt. This led me to always be on a budget and spend on things with money I have. I dislike putting myself into a situation where I am continually being chase for owing someone money. The feeling is uncomfortable and can cause stress in my life. 


    6. Bad Debt Can Cause Stress in Your Life.
    If you have tons of credit card debt, this can lead you to have much stress. This can limit your ability to enjoy life since you will stress a lot with the debt that you acquire. Without a system to manage your loans and pay off credit card debt, your stress can increase and take years off your life. Not to mention, the constant stress debt collectors can place on you to pay off your debts. 

    I have seen people in real life being stuck in debt and stress a lot because they are always needing to keep working just to finance their debt expenses. This is an unpleasant experience for someone to have. What is the point of making money from your job just to pay on debt interest expenses? It's similar to becoming someone's slave, and those hard works you put into your wage are used only to pay those credit card debts. I believe people that work hard need to create the wealth and life they dream of. However, you need to be on the right track and follow a plan and strategy to achieve it. 

    If you decide to start your journey to get off debt and start building wealth, you can read an article that I have written that explains how to. The article is based on Dave Ramsey's advice for people to get out of debt and start building wealth. He has helped many people the steps and ways people can get out of the mess and start a new beginning. It will not be easy, just like a fat person trying to be slim and fit; it requires discipline and dedication to achieve this financial goal. However, making the right decision will eventually pay off when you reach that goal. 


    7. It Can Debilitate You to Buy a Property.
    Having too much debt can prevent you from buying a house. Property prices have been increasing almost every year, even after the 2008 financial crisis. California's home prices have been escalating sharply as the state recovers from recession. The Legislative Analyst's Office said, "Since bottoming out in late 2011, California's median house price has increased by 45 percent – about 10 percent a year –reaching around $450,000 as of September 2015." However, with property prices always increasing each year, you cannot purchase one if you still carry massive debt in your personal finance. You do not want to put yourself into buying a house if you are still in a financial mess. Remember, purchasing a home when you are still in debt will put you more in trouble than before.

    I believe that anyone who wants to purchase their first home requires to put themselves in a financial situation where they don't carry any debt. If you buy a house when you are still in debt, you are putting yourself in a deeper hole. Remember, owning a home usually requires much upkeep that needs you to pay. And putting yourself in that situation when you are still in debt will cause many problems and headaches towards your personal finance.

    It's best to purchase a home when you are out of debt and have money for the down payment. Even when I don't carry any debt, I don't have my own home. The reason for this is because I know the cost of owning a house. There are many expenses, such as real estate tax, property maintenance, and many more. Since I am focused on retiring early in life, I avoid owning things that might require me to have upkeep. Not owning my own home help me to avoid expenses in which money can be used towards my investment. I was able to focus on saving and investing more of my money because of this reason. Remember that a house you live in is considered a liability instead of an asset since you have an outgoing cash flow coming out of your pocket. 


    8. It Can Lead to Bankruptcy & Leave You Homeless.
    If your credit card debt is so high that it damages your credit score, you can pretty much kiss the idea of a mortgage goodbye. And while you don't necessarily need the same level of credit to rent an apartment as you do to buy a home, if your credit is in a real mess, you might have trouble getting accepted as a tenant. Even if you are approved, your landlord or management company might insist that you put down an extra security deposit, or several months' rent to compensate for your terrible credit.

    Many people place the blame for a rising number of bankruptcy actions squarely on credit cards. The truth is that many of those in debt did not abuse their credit cards or live extravagant lifestyles on borrowed funding. Credit card companies do encourage the use of their cards, however. As you approach a credit limit, they often will extend that limit several hundred dollars higher. If you do not pay down your balances and keep spending more, you will soon discover that you owe hundreds or thousands of dollars on that card.

    Reasons for excessive credit card debt are job losses, illnesses, divorce, and other hardships. As credit card minimum payments increase because you are not paying the cards off, what you need to pay each month could easily exceed your income. With late payments, you have assessed high penalty fees and possibly even more top interest rate hikes. This can result in you needing to declare bankruptcy and leave you homeless. 

    This is sad but true. These events usually happen when a person is recently laid off from their jobs and carries a large amount of debt. When they don't have a job to pay off their credit card balances, this can leave them no other option but to declare bankruptcy and end up being homeless. This is the number one reason why I always have stayed away from credit card debt. Depending on debt can result in you to make poor choices in life.


    The Bottom Line
    I hope this article provides information on how credit card debts can ruin your financial life. Credit card debt can be disastrous, especially if you ignore those debt payments. Those debts can accumulate quickly if you use them irresponsibly, which can cause financial trouble. I would avoid using a credit card since I know many negative factors that come with it. Avoiding myself to acquire debt has helped me to my journey to financial independence. I was able to stay on budget and invest the rest of my money into the stock market. 

    If you still like the convenience credit cards provide, it's best to use a debit card since it has the same function. However, if you still want to use a credit card, please be sure to use it responsibly. You don't want to put yourself into financial messes that cause stress and headaches in your life. So always remember to pay your credit card debts on time. So be smart with your decision making!

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