Enough Is Enough: When to Draw the Line on Credit Card Debt

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Credit is relatively easy to come by these days. In fact, you’d be hard-pressed to find someone who has never received at least one “exciting” credit card offer by mail. Over 60 percent of Americans had a credit card as of 2019 — and U.S. cardholders collectively carry more than $830 billion in this type of debt. It’s also worth noting this is a trend on the rise, indicating more people are getting comfortable with credit and putting more purchases on “plastic” year over year.

It can be tough to know when exactly to draw the line on credit card debt. But there may come a point where you have to say enough is enough in order to protect your financial health. 

Signs You Have Too Much Credit Card Debt

It can be tricky to pinpoint the moment when credit crosses the line from “substantial yet under control” to “too much to handle.” That point looks a little different for everyone, depending on income, savings and lifestyle.

Here are a handful of signs you may have an unsustainable amount of credit card debt.

Minimum Payments Have Become the Norm

Cardholders always have the option to pay only the minimum due, usually a small percentage of the total balance or a low fixed fee — like 2 percent or $30. This keeps late fees and delinquency at bay, but not much else.

As NerdWallet outlines, here’s what you can expect to happen if you pay only the minimum:

  • It will take much longer to pay down your debt.
  • You will accrue higher interest charges over time
  • Your credit score may take damage as your credit utilization rises.

Going this route may provide immediate relief, but it’s not a sustainable long-term solution. Slipping into the habit of paying the minimum can also kick start a debt cycle that’s hard to climb out of — many Freedom Debt Relief reviews come from debt settlement enrollees who eventually fell behind on even minimum payments when money got tight.

Your Credit Utilization Rate Is High

Credit utilization is a measure of the amount of available credit in use. Divide the amount of revolving credit you’re currently using by the amount available to you. If you have a total of $15,000 available across three cards and $5,000 in outstanding balances, your utilization hovers around 33 percent.

The general rule of thumb is to keep utilization at or below 30 percent — both in terms of total credit and per card. Anything higher can signal to lenders you’re overspending or otherwise having trouble managing your finances.

You Have One or More Maxed Out Cards

Maxed cards similarly signal to lenders you may be having financial troubles and are therefore inherently riskier. Maxing out a card spikes your credit utilization ratio, which is why it’s preferable to spread your balances out across a few cards rather than allowing one (or more) cards to reach their limits.

You’re Borrowing Money to Pay Your Debts

Debt consolidation is a process in which you take out a loan specifically to pay off your high-interest credit cards. This solution can be helpful if you’re able to secure a lower interest rate and fixed loan terms — but can become problematic if you’re continually borrowing from one source to pay off another.

Furthermore, paying off credit cards or medical bills with other credit cards creates a slippery slope, so heed it as a warning that it’s time to get your credit card debt in check. Consider setting up a meeting with a credit counselor to go over your budget, and look into solutions like consolidation, settlement and management if do-it-yourself repayment isn’t making a dent.

These four signs can serve as a wake-up call that it’s time to rein in your credit card debt sooner rather than later.

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