Most people know that missing payments can be detrimental to their financial health and credit score. What they may not realise is that debt of all kinds carries a heavy price. Even if that debt is within their means to pay. If you’ve never considered switching to a cash-only lifestyle before, here are a few reasons why you might want to consider it. 5 Reasons Debt Is Bad For You and How to Fix It.
#1 Having too much credit damages your credit score
Even if you’re staying current on your bills, having a lot of active debt will make it more or less impossible to take out a loan or other kind of credit. Your credit score is affected not only by delinquent accounts but also by open lines of credit. Carrying a lot of debt can make it very difficult to qualify for a mortgage or car loan with a reasonable interest rate.
#2 You waste a lot of money on interest fees
If credit card companies lent you money free of charge, they wouldn’t be able to stay in business. In some cases, the interest charged on your credit card or loan will vastly exceed the balance of the debt itself. The money you lose in interest every year could have been invested in your retirement or a college fund instead.3. Some credit cards have an inactivity fee.
#3 Some credit cards have an inactivity fee
If you think you’re safe because you’re not using your credit card, think again. Your card company could be charging you a monthly fee for having the card without using it. You might have racked up substantial charges on the account without even knowing it. Those charges accrue interest just like your regular purchases.
#4 If you fall behind on payments, you’re in serious trouble
You might be able to make all of your payments now, but what if you lose your job or have an unexpected emergency expense? A single month of missed payments on multiple lines of credit can be absolutely devastating. Credit card and loan companies can charge steep late payment penalties and report to credit bureaus whenever late payments are made. It’s much better to have buffer room built into your budget so you’re prepared for emergencies.5. Worrying about debt can make you sick.