Here’s What Happens When You Ignore Your Credit Card Debt

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Since credit card debt is expensive, it’s best to pay it off as quickly as possible. Learn more about why you shouldn’t disregard credit card debt. 

Credit card debt is, unfortunately, a common issue for many people. While credit cards offer convenience, it can be easy to overspend beyond your means if you’re not cautious. Since credit card interest rates are usually high, a debt problem can quickly get out of control and negatively impact your personal finances. For those with existing credit card debt, it’s essential to tackle it quickly. Here’s what happens if you ignore your credit card debt.

Your credit card balance will climb as interest accrues

You’re not alone if you have credit card debt you’re trying to pay off. However, knowing the risk of delaying eliminating your debt is essential. It’s important to remember that you’ll continue to pay interest charges when you carry a balance on your credit cards.

That’s because, for most credit cards, credit card interest accumulates daily. As you might imagine, credit card debt can add up quickly the longer you carry a balance. As your credit card balance climbs, reaching other financial goals can become more challenging. Plus, it can cause added stress. Tackling your credit card debt sooner rather than later is best.

Your credit score can suffer

When you disregard your credit card debt, your credit rating and credit score can be negatively impacted. One factor that makes up your credit score is your credit utilization, or how much available credit you use. Experts recommend keeping your credit utilization ratio below 30% if you’re trying to maintain a good credit score.

When your credit card balance grows, you’ll use more available credit. That means your credit utilization ratio can increase, which could result in a lower credit score. Paying down your debt can help to reduce your credit utilization ratio and may help to improve your credit score.

How to pay off credit card debt quickly

Are you ready to eliminate your credit card debt? When it comes to paying off debt, it can be beneficial to prioritize your highest-interest debt to save money on interest fees. This popular debt payoff strategy is known as the debt avalanche method. With this method, you put more money towards your highest-interest debt first.

If you choose this method, make sure you continue to pay at least the minimum amount due on all your other debts, including your credit cards with lower interest rates. It’s never a good idea to skip credit card payments. If you miss a payment, you’ll be charged late fees. You could also see negative marks on your credit report if you pay your bills late.

If your credit card balance is overwhelming and you’re worried about additional interest charges hitting your account, you might consider getting a balance transfer credit card. If this option is available, it can help you save money on interest so you can get rid of your debt faster.

A balance transfer credit card lets you transfer your debt from another card and take advantage of a promotional 0% APR for a set amount of time. During that timeline, no additional interest will be charged. For many consumers, this makes tackling their credit card debt more manageable.

Most balance transfer credit cards charge a balance transfer fee. You can expect to pay around 3% to 5% of your transferred balance. For most people, this fee is worth paying to avoid continued interest charges on their debt. You can eliminate your debt without paying interest fees if you pay the entire balance off before your 0% interest promotional period ends.

Don’t ignore your credit card debt

Credit card debt can be overwhelming, but it’s possible to pay it off. The first step is to be honest about the amount of debt you have so you can devise a strategy to eliminate it for good.

You can use our credit card interest calculator to determine how much money you should put towards payments to eliminate your debt in a timely manner.

By tackling your debt quickly, you can free up some of your income for other expenses or start working on other essential goals, like building a solid emergency fund.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Avalanche. The Motley Fool has a disclosure policy.

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