3 Ways Credit Card Debt Can Ruin Your Life

By Maurie Backman Markets Fool.com

Even though it's pretty much the worst type of debt to accumulate, Americans have their fair share of credit card debt. According to ValuePenguin, the average credit card debt among U.S. households is approximately $5,700. When we look at this data broken down by age, we see that 45- to 54-year-olds have the highest amount of credit card debt ($9,096 on average), while young adults under 35 have the lowest levels of debt ($5,808 on average).

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While racking up credit card debt might seem like an easy enough way to afford the things you want, or need, but don't have the money to pay for, getting into debt can have serious long-term consequences that filter into various aspects of your life. Here are just a few ways credit card debt can upend your finances -- and your sanity.

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1. It can monopolize your (limited) income

Credit card issuers don't offer the option to make minimum payments out of the goodness of their hearts. Rather, they bank on customers carrying balances so that they can collect interest payments.

Any time you fail to pay your credit card bill in full, you're automatically signing up to pay interest on what you owe. And if you let that debt accumulate, you may come to find that the amount of interest you owe equals, or even exceeds, your original principal -- at which point you'll be spending a fortune just to pay it off.

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Let's say you've managed to accrue a $5,700 balance, which is what the typical borrower owes. If it takes you seven years to pay it off at 20% interest, you'll wind up spending close to $5,000 on top of your principal. Furthermore, during that repayment period, you'll end up on the hook for roughly $127 a month toward your credit card -- money that could otherwise be put to better use, such as building an emergency fund or having more leeway to cover your living expenses.

2. It might leave you homeless

If your credit card debt is so high that it damages your credit score, you can pretty much kiss the idea of a mortgage goodbye. And while you don't necessarily need the same level of credit to rent an apartment as you do to buy a home, if your credit is truly abysmal, you might have trouble getting accepted as a tenant. Even if you are approved, your landlord or management company might insist that you put down an extra security deposit, or several months' rent, to compensate for your terrible credit -- and that will only drain your finances further.

3. It can stunt your retirement savings

Large levels of credit card debt won't just cost you money in interest; they'll cost you countless dollars in missed investment opportunities. If you're spending hundreds per year on credit card interest, that's money that could otherwise be used to fund a retirement account. And by foregoing those contributions to your IRA or 401(k), you're not just missing out the money you would've put in, but the growth it would've achieved.

Imagine you're able to invest your money at an average annual 7% return (which is below the stock market's average), only because you're paying interest on a credit card balance, you have $50 less per month to put toward retirement. Over a 20-year period, you'll have lost close to $25,000 for your nest egg. Even if you're able to manage your credit card debt payments, think about what you're giving up by spending that money on interest -- and pledge to get rid of that debt, pronto.

Breaking the cycle

Getting out of credit card debt is easier said than done, but there are steps you can take to pay off your debt sooner. First, take a look at your outstanding debts and start paying off the ones with the highest interest rates. Next, consider transferring your existing debts over to a credit card with a more favorable interest rate to lower your payments on a whole.

Finally, reach out to your lender and ask to have your interest rate lowered. If you've managed to stay current on your minimum payments, there's a good chance your lender will comply. In fact, a recent CreditCards.com report found that 69% of consumers were able to lower their interest rates simply by asking. No matter what steps you take to get out of credit card debt, the sooner you do, the sooner you'll reclaim control of your finances and avoid future repercussions.

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