Credit Card Debt

1998 Words4 Pages

The Negative Impact of Credit Card Debt

Credit cards are used as a foundation for setting up your financial future. Although this may be true it can also bring you down every time you swipe. The purpose of this paper is to illustrate that credit cards can be dangerous because it can lead to debt and will determine what your future will look like. College graduates in their late 20s can face three major issues such as over spending, high interest rates, and possibly low credit scores when dealing with credit card debt. Strategic recommendations include not only being careful when using credit cards, but also limiting yourself to what you can and will be able to handle in the future.
“Perhaps the greatest disadvantage of using credit is the …show more content…

When applying for credit cards and loans, lenders determine what you are able to afford by looking at your past credit history. Depending on how good your history may be lenders will assign you an interest rate that will determine how much you have to pay to the bank for the services. “Interest rates serve as compensation for the risk taken on by the lender based on the borrower’s credit history and other financial details, and provide a way to cover costs associated with lending.” (Prime Rate) As college students start applying for credit cards, they basically start out with no history causing them to encounter high interest rates. Lenders rely heavily on your history because they want to be able to make sure they are lending money to people who are willing to pay them back. This is a great risk to a lender because if the consumer doesn’t pay what they owe, the lender will have to take a loss. For a company taking a loss is very important because they are not able to bring in a profit if the consumer will not pay off their debts. This then creates a problem for new applicants because people with the same revolving history as the consumer that did not pay will be set back. College students may have one of the hardest times applying for credit cards because not a whole bunch of them work and they are likely to spend more than they need. This …show more content…

Making sure that you do not overspend will decrease your chances at high interest rates and increase your credit score. These are important to college students and graduates because it sets up your future. You wouldn’t want to be working just to pay off your loans and you want to be able to make big purchases on your own. You can’t rely on your parents to help you all of your life and you have to take that responsibility. Credit cards are the start of your adult life so make sure you don’t mess that up.
Works Cited
Cesneros, J. (2017, September 16). (U. Kaina-Freitas, Interviewer)
Credit Card Debt What You Need to Know. (n.d.). Retrieved September 19, 2017, from National Debt Rlief: https://www.nationaldebtrelief.com/debtresources/creditcarddebt/
Dowdy, L. (2015, September 1). Which balance should you pay off first. Retrieved September 20, 2017, from CNBC: https://www.cnbc.com/2015/08/31/which-balance-should-you-pay-off-first.html
Irby, L. (2017, September 10). Learn How Debt Affects Your Credit Score. Retrieved September 19, 2017, from The balance: https://www.thebalance.com/how-your-debt-affects-your-credit-score-960489
(2015). Focus on Personal Finance Edition 5. In L. D. Jack Kapoor, Focus on Personal Finance Edition 5 (p. 576).

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