How Does Credit Card Debt Lead to Financial Stress?

Credit cards can be convenient but the resulting debt could lead to financial stress.
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Credit card debt can lead to financial stress of two kinds: In emotional terms, credit card debt can create friction between you and your spouse, and in dollar terms, credit card debt can strain your financial ability. While credit card debt in and of itself is not necessarily a financial stressor, the negative effects of credit card debt are widespread and tend to grow as time goes on.

Interest and Payments

One of the most nefarious things about credit card debt is that it is not static. Thanks to the generally high interest rate on credit cards, even a small debt can take years to pay off if you only make minimum payments. You may never pay off cards with higher-than-average rates. For example, if your credit card charges 25 percent annual interest but you only pay the minimum monthly payment of 2 percent, your debt will continue to grow. When your debt grows even if you do not put any additional charges on your credit cards, it can create stress. If your debt takes years to pay off, that causes stress, too. Even the act of whittling your credit card debt by making substantial payments can create stress in the form of stretching your finances to the limit. Every dollar you spend making credit card payments is one less dollar you can spend on basic necessities like food and rent.

Relationship Strain

According to PRLog, credit card debt may be the leading cause of divorce. Couples often disagree on how much money they should be save and how much they should spend -- and rising credit card debt can aggravate that discussion. Further stress can arise if only one spouse runs up a large credit card debt or brings a lot of debt to a new marriage. While in certain states debt accumulated before marriage is the responsibility of the individual spouses, in reality, any money used to pay back debt is money that the household as a whole cannot use.

Credit Score

Your credit score is the key to your ability to borrow money in the future. While it can be a wise idea to limit your exposure to credit card debt, the reality of the American economy is that most couples at some point need to take out a loan -- be it for a home or a new car. Having credit card debt can hurt your credit score and hamstring your ability to receive a loan at a decent interest rate -- or even obtain a loan at all. Many employers also use credit checks as a part of the hiring process; a credit history riddled with high debt or an irresponsible payment history could prevent you from getting a job.

Lawsuits and Judgments

If your credit card debt gets out of control and you fall behind on payments, your creditor can sue you in court and win a judgment against you. With a judgment in hand, a creditor can garnish your wages, put a lien against your property and even levy your bank accounts. Outside of bankruptcy, there is no way around a judgment other than paying it off or working out a settlement with the creditor. Having to deal with the court system and the effects of a judgment can be extremely stressful.

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