3 Ways Carrying a Credit Card Balance Can Hurt You

Here's why it pays to avoid a credit card balance at all costs.

Sometimes, even the most responsible credit card users wind up with a balance they can't pay off by the time their bill comes due. Maybe you may have a month where your expenses come in higher than expected. Or, like many people, you may get tempted by a sale and go a bit overboard on a shopping spree.

But while carrying a credit card balance isn't so uncommon, it's also not the most healthy thing to do. Here are a few ways a credit card balance could hurt you.

1. It can cost you money in interest

Any time you fail to pay off your credit card balance by the time your bill is due, you sign up to pay interest on the portion you carry forward. Now, if you end up carrying, say, a $250 credit card balance for three months on a card that charges 20% interest, the damage won't be so bad. In fact, all told, your interest charges will amount to just $5.

But if you carry a larger balance for a much longer period of time, the credit card interest gets worse. Say you rack up a $2,000 credit card balance that takes you 18 months to pay off at 20% interest. In that case, you'll end up losing $291 to interest charges -- a far cry from a mere $5.

2. It can lower your credit score

Carrying a credit card balance could raise your credit utilization ratio, which is a key factor that goes into calculating your credit score. Your credit utilization ratio speaks to how much of your available credit you're using at once, and the higher that ratio, the more damage your score could sustain.

Of course, if your credit score takes a hit, it could become harder for you to borrow affordably when you need to. And you may also be denied credit card offers that appeal to you, such as those that offer generous sign-up bonuses or extra cash back on your purchases.

3. It can cause you a world of stress

Some people just don't like the idea of owing money or being in debt. If you're one of them, then carrying a credit card balance could raise your stress levels and impact not just your mental health, but also, your physical health.

How to avoid carrying a credit card balance

If you use credit cards regularly, your best bet is to pay them off every month. To increase your chances of being able to do that:

• Stick to an official budget that outlines your various monthly expenses rather than spending money freely.
• Keep tabs on your credit card spending by logging into your accounts every week rather than waiting until your statements arrive to see how much you've charged.
• Have money in the bank for surprise expenses so you're not forced to whip out your credit card to cover unforeseen bills.

With the right strategy in place, you can avoid carrying a credit card balance -- and the negative repercussions that come with it.