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In today’s world plastic money is being used more than ever. Usage of credit cards has also increased significantly. Credit cards can be very helpful in paying for the expense load and comes in very handy especially when you are in immediate need of spending money. However, you have to be very careful while spending and managing your balance, as there are some disadvantages to have a credit card which immensely affects your credit score.

High credit score risk will end up troublesome for you as it will be more difficult for you to pay off your credit card bill. Secondly, if you are in need of financial assistance, institutions will be hesitant to provide you loans or any financial aid. Some of the disadvantages of carrying a credit card balance are:

Credit Cards

1. Credit Card Application

Applying for a credit card can affect your credit score either you are using it or not, as your applications are also being recorded in your credit score report. Just even applying can have a negative effect on your score. To avoid increasing your credit score risk, you should keep your applications to a minimum.

2. Keeping a High Balance

It is a common practice that when you have a credit card, it can be really easy for you to indulge in extra spending. There is also a risk of maxing out your credit card balance. When you have a high balance or you max out your card, it makes you look like a risky borrower; it impacts your score negatively. Even if you pay off your credit card bill the report will still show that high balance.

3. Interest charges

The greater your credit card balance is the more it is difficult for you to pay off your bill timely especially when you are on a tight budget which was the reason you had to use the card for your expenses in the first place. Unpaid card bills result in high interest rate charges which not only increase the credit score risk but also put you in more financial trouble spiral.

4. Transferring Credit Balance

Many people have more than one credit card and they tend to transfer their balance from one card to another to pay off their credit card bills. This method can put them out of the fire but it can be more harrowing than the current problem as the other credit card may have higher interest rates due to which you will end up paying more than what you actually had to in the first place. In addition there are also credit transfer charges which take an additional pull from your pocket.

To keep the disadvantages of carrying a balance at a minimum, you should look to keep your balance at 30% of your credit limit. You should also consider using the credit cards when necessary, so that you pay the bill on time without affecting your budget.

Categories: Credit Cards