According to a recent National Foundation for Credit Counseling (NFCC) online poll, 18% of consumers think that carrying credit card debt from one month to the next is a responsible way to manage their finances.  Unfortunately for those 18% (almost one out of every five people), carrying over debt can bear more consequences than rewards.  Some of the consequences that the NFCC touches on are as follows:

? Interest on a credit card is typically calculated on an average daily balance. For those who carry a balance over from the previous cycle, interest is not only charged on the unpaid balance, but on any new purchases added to the balance.

? With interest added onto the balance month after month, consumers end up paying interest on the interest.

? Carrying a balance has the potential to negatively impact a person’s debt to credit ratio, one of the main components of credit scores.

?A higher balance decreases the amount of credit available for future purchases.

On the other hand, not having any credit cards at all can have some negative recourse as well.  Using credit cards in a responsible manner helps to build your credit, resulting in more opportunities to qualify for necessary loans.  By not having any credit, the possible lender has no history to determine the “risk” of lending to you, therefore limiting potential options for obtaining  loans.

One way to be a responsible credit card holder is to pay off your debt monthly.  There are a few benefits for utilizing your credit responsibly, in reference to the NFCC article:

? Timely bill payments and a low credit utilization ratio are typically the top weighted elements in credit scoring models. Therefore, this type of behavior could have a positive impact on an individual’s credit scores.

? The convenience of using credit can be enjoyed without paying any interest or penalties.

? The entire line of credit remains available for future use.

? Stress and worries of being over-extended are avoided.

 If you need to get a handle on your debt, call Consumer Credit Counseling Service of Rochester today.  You can meet with one of our Certified Credit Advisors to help you budget and resolve any issues you may be having.  Call (585) 546-3440 to lighten the heavy burden that debt leaves behind. 

 


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