It may seem like a silly question — “What happens when I have credit card debt?” You know the answer; it means that you owe banks money for things you’ve bought with money they lent you, and you’re probably paying a hefty bit of interest on that ‘loaned money.’
But did you know that when you have credit card debt, it’s not just the debt itself, or the growing interest owed on that debt that can affect your financial security? Your credit score can even be negatively affected in a way that feels like you may never recover. That’s why talking with licensed, professional credit counselors like Christian Debt Counselors can make a difference in not just your today, but your financial tomorrows too.
How is it that I have credit card debt?
Most people have at least a basic understanding of how credit works, and how easily the time to pay the piper can come not just quickly, but at a heavy financial price to boot. Credit is just that—an amount of money borrowed with the assumption that it will be paid back. The thing is, though, creditors don’t just assume the money lent will be paid back. They expect that it will not just be paid back, but with interest—often significantly high rates that add so much more to our debt.
It’s easy to find oneself in debt; job loss, family emergencies and more can put you in a position where you exhaust savings (if you even have any) and turn to credit to help get you through. Even when the ‘crisis’ is over, you may find the after-effects of credit card debt crippling.
What does the negative cycle of credit card debt look like?
When we ‘max out’ our available credit for whatever reason—job loss, emergency, vacation—whatever it is that eats away at your credit limit, we affect our credit utilization. Credit utilization is the ratio of our credit card balances that are outstanding to our actual credit limits. In essence, it’s a ratio that tells creditors how much of our credit we are using.
And when creditors believe we are using most of our credit, they get concerned. Not only do they sometimes lower our credit limits, which then lowers our credit scores, but they’ll even cancel accounts because they fear that you’re in a financial situation that may not let you pay them back.
How does a lowered credit score affect credit card debt?
Even if that racking up of debt truly is because of a temporary or emergency situation, the fact you have that credit card debt puts lenders on alert, and can often lower your credit score.
Lowering your credit score sort of puts you in a catch-22 of credit card debt. Whether you’re diligently paying your credit card debt down on a consistent basis or you’re missing payments because you simply can’t make them, your lenders are calculating your credit score based on not just your timeliness of payments, but on how much you are paying them and what your credit score is.
Creditors will look at your lowered credit score and use that to continue to reduce credit limits and accessibility to credit accounts. Some will even close accounts altogether, even if they are accounts-in-good standing simply because your lowered credit score makes you a riskier investment for a creditor. The irony is that reducing the limits and closing the accounts is often what leads to a lower credit score in the first place.
Ultimately, many people with credit card debt feel they can’t ever dig themselves out of the cycle, or at least do so with a good credit score at the same time.
What help is there if I have credit card debt?
So if you’re asking, “What happens if I have credit card debt,” maybe a more important question might be, “What happens when my credit score is lower because I have credit card debt?”
The answer to that is pretty scary. With a lower credit score, you may end up getting higher interest rates for loans for cars, homes, student loans and even the very credit cards that got you into the debt mess in the first place. Additionally, insurance companies may give you higher premiums (or deny you coverage) and deposits for utilities and services may be higher. Even more worrisome is the fact that employers may decide not to give you the job based on your credit score, and ultimately that goes back to the multiplying negative effects of credit card debt.
The good news is that this negative cycle of credit card debt adversely affecting your financial security and future doesn’t have to keep you in a tailspin. There are competent and compassionate credit counselors who are interested in helping you manage and settle your credit card debt. They will compassionately walk with you as you eliminate your credit card debt and take the steps to freedom from the bondage that debt brings.
Christian Debt Counselors don’t just want to help you consolidate or settle your debt; they want to help you live the life you were meant to live without the chains of anxiety and fear that credit card debt so often brings. You don’t have to be a victim of the debt cycle that just keeps you running in debilitating circles.
The next time you ask, “What happens if I have credit card debt?” let the answer be, “Call Christian Debt Counselors.” Helping people manage debt with a Christian perspective is what they do best and they want to bring that relief to you. Let them put you on a positive, secure financial path right now!