There are countless commercials, mailers, and emails offering cashback or other deals when individuals sign up for a credit card. Some promotions may seem too good to be true, and that’s the point. Credit card companies want people to open accounts with the hope that they can make a profit off interest from an individual’s debt. But that raises the question, is it good to have some credit card debt?
Benefits of Credit Card Debt
In some aspects, yes — having some credit card debt can be beneficial. The most significant benefit is by having some credit card debt and paying it off in a timely manner will impact an individual’s credit score.
A credit score is used to determine the likelihood of debt being paid in a timely manner. Having a favorable credit score can result in an individual receiving better interest rates for future debt.
While an individual may be financially secure to pay for purchases without needing to borrow money, this is not the case for everyone. Many people request to take out a loan either through a financial institution or by applying for a credit card when it comes to making large purchases such as buying a home or vehicle. If that person does not have a credit score or low credit score due to not having any other purchases that required them to pay back that debt, then an individual could be denied their request for finances.
Repercussions of Credit Card Debt
Once someone is approved for a credit card their mindset may shift which can turn into a spiraling amount of debt. In particular, younger adults can fall victim to massive amounts of credit card debt in a short period of time if they are focused on satisfying their desire to have products or other services immediately rather than make a strategic plan to pay off debt.
Additionally, credit cards typically have a much higher interest rate compared to other loan-advanced programs resulting in the borrower paying back much more money than they initially took out.
While the idea of seeing “rewards” offered or other incentives for applying and receiving a credit card may be tempting, individuals must consider both the pros and cons when it comes to taking on this type of debt.
If you are struggling to get out of credit card debt, the experienced credit card debt attorneys at Licata Bankruptcy Firm are here to help. We will review your case and navigate the best course of action so you can get financially back on your feet. See what our past clients have said about our work and reach out today for a consultation.