Credit Cards are Dangerous in the Hands of the Majority

Credit Cards are Dangerous

Hello folks! Credit card debt and bad credit is challenge many folks face. Today I wanted to go into this issue and offer resources for help and assistance.

Consumers get convenience and credit card companies make profit from the interest they charge. The vast majority of their income would not be created if credit card users simply accepted that convenience and paid off their statement balances in full at the end of the month. The card companies are delighted that the vast majority of credit card holders don’t do that! Therein lies the danger of credit cards. Holders are not required to pay off their bills in full; there is a minimum payment to be made printed on the statement. It allows consumers to buy things that they have insufficient cash to purchase by taking credit. It allows them to overspend in their daily lives to supplement their monthly income. The interest that card users pay for the privilege is high, some would say penal, and credit card debt is a major problem wherever cards are available and that includes every state of the USA.

The average level of debt among those Americans who do not pay off their balances in full at the end of every month is in excess of $15,000. The best interest rate that card holders can expect to have applied to those balances at the end of each month is around 15%. If you have a card and a poor credit score it is likely to be closer to 20% and that credit score is unlikely to improve any time soon if you are approaching your credit limit and finding yourself getting into increasing trouble with your debt level.

The True Reality

Balances do not disappear if you simply ignore it. While you are still within your credit limit you may not understand the seriousness of the situation because you will not be pursued by any debt collectors. You are not marked down as such in your credit history as long as you make the appropriate monthly payment on time. It is all too easy to ignore the fact that your balance hardly falls after paying that minimum before the next interest is added. Take for example the situation if you have a balance of $1,500 and the card company wants a minimum payment of 2% of that total; $30 at the end of the month. If the rate charged is 15% that minimum payment addresses such a small amount of the principal owed that it will take 16 years to clear the balance in full and the interest charges you will have paid is a few hundred dollars more than that current balance. That presupposes that you do not use the card again. Can you think of a bigger waste of money?

Credit Score

As you get towards your credit limit on a card your credit debt ratio will begin to harm your credit score and should you begin to default on your minimum payments because you no longer have any credit left to support your ‘’overspending lifestyle’’ then the position worsens and the debt collectors will start to call.

Many people refer to your credit score. It can be everyone from your insurance company when deciding on premiums to a company to whom you have applied for employment. If you are looking for a good resource on where to find your credit score and how it is calculated, check out Cafe Credit.

The secret to using a card is to pretend that it is cash that you actually have elsewhere and will hand over later; in this case when the statement comes in. Take no long term credit and a card is extremely convenient.

What this does not address is the problem of a balance that you already have. In recent years a new breed of lender has emerged online that operate in a different way from traditional financial institutions. They still want to make profit of course but they are inclined to look at whether an applicant has the regular income in order to approve a loan rather than the applicant’s previous history. The process of application is simple and quick. Lenders will look at the application immediately and transfer the money within a working day. Where that loan amount is used to pay off credit card balances in full the process of repairing personal finances begins. The interest rate charged on personal loans, even for those with bad credit is much lower than the card companies use.

Avoiding Personal Loan Scams

Unfortunately, there are folks out there looking to scam you with loan offers that are just too good to be true. There are a number of things you can do to protect yourself though, and the Federal Trade Commission (FTC) and other consumer-rights groups regularly issue warnings about loan scams. If you are looking for a personal loan, you should:

  • Be suspicious of unsolicited loan offers. Be careful when you receive phone calls or mail offers that you did not request.
  • If a lender is not interested in your credit history, than that is a red flag. Legitimate lenders would definitely be interested in your credit.
  • Do not send money upfront to a lender until you are sure you’ve received loan funds or they have successfully paid off your previous credit card balance.
  • Always verify the actual lender when going through a loan broker. Research and investigate the institution, its physical locations, etc.

Be extra cautious if you have bad credit or are seeking a personal loan. But know that there are good and legitimate lenders out there to help those in need. Additionally, look to your State which will provide free assistance and resources to those looking to improve their credit.


Have you had credit issues in the past or going through any right now? Feel free to leave a comment as to what has helped or worked for your. Thanks!

Thanks for taking a look!

The Green Swan

Work Harder, Work Smarter, Retire Earlier and Find Your Beach






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  1. We haven’t ever had credit issues but yesterday we received three 0% offers in the mail on our credit cards. These allow you to transfer balances and even move money into your checking account to use – basically like a loan. One was with a 3% fee and the other two had 2% fees. We use these strategically to pay down mortgages at times, but these can totally get people screwed up too. The fee is pretty low but people forget that taking a big amount hurts your credit score (which we aren’t concerned about) and at the end of the terms, you still generally have a very big balance since they make the payments so low. We are doing this now with $22K that we used to pay off a mortgage at 5.89%. The payments are only $300/month. That balance won’t move much by next summer (we will pay it off then).

    1. Vicki, that never would have occurred to me! I agree with JW that one must be careful with it. But it’s a really interesting strategy that could be used successfully with small mortgages in real estate investing. As long as you are certain you can pay off the balance, of course.

      We pay off our credit cards in full each month and have for the last 20 years. Though we’ve had consumer debt in the past, I’m thankful we never had credit card debt.

  2. I totally used credit cards to supplement my lack of higher income. That and poor spending habits. I had about 3 cards and I remember when I got a Target card, I was going to only use it for emergencies and pay down the others, but 3 months later it gets pulled out at dinner and then it turned into an everyday card too. When I got out of grad school I was close to $16 or $18k in debt with just credit cards.

    Fortunately, I was in a position to get them paid down relatively quickly, but that type of credit/debt ratio along with my student loans, and poor credit score kept me off of our home mortgage so I wouldn’t jack up the interest. So embarassing.

    It takes a lot of discipline and being mindful to break those poor spending habits. I still find myself getting into mini spend cycles with my allowance where it may go a month or 2 closer to zero than not. It can be a tough habit to break.

    1. Not an uncommon story at all. Glad you were able to get things straightened out early and quickly! I can totally see, and I’ve witnessed it elsewhere, how difficult spending habits can be to break… Especially when engrained over years.

      Thank you for sharing your story, Mr SSC.

  3. I was one of those guys that got sucked into credit cards back in college… but man, was I the life of the party! Round of drinks – on me! Dinner with friends – I’ll get that!

    I was really stupid! I racked up about $30k in credit card debt. I didn’t realize just how deep I was until I found Quicken a little over 15 years ago and loaded it all up. I stared at the screen and went “Huh… well, this sucks!”

    I did crush it on getting out of the debt, but I had a big distrust for credit cards for a long time. I now use them, but pay them off every 2 weeks on payday rather than waiting for the bill. Might be a little bit of overdoing it, but boy, I hate those stupid things and don’t want to fall into that trap ever again!

    — Jim

    1. Yeah I bet those college days were a blast! Glad to hear you recovered from that quickly though and I totally understand your aversion for credit cards today.

      Thanks for sharing your story, Jim!

  4. I got my first credit card when I was 18 and headed off to college. Luckily my Mom told me YOU HAVE IT PAY IT OFF EVERY MONTH. Quickly I learned how to take advantage of credit cards. This was the time you could get those 0% for 12 month offers. So basically I would put all my expenses on a credit card for the year and pay maybe 50 or 100 bucks a month. I had cash in a checking and savings account but I figured I’d let that sit there in case of an emergency. Then once summer came I would pay it off with my first few summer job paychecks and whatever cash I had at that point. I never ran into a problem but I also didn’t run up a big bill throughout the school year. I only spent what I had, just didn’t pay it off.

    On the other hand I had friends put all their college expenses on a credit card, where they DIDN’T actually have the cash. Now they are struggling to get mortgages because their credit is so bad.

    Credit cards are a powerful tool, if you are mature and can handle them. Since I’ve had credit cards since I was 18, my credit score was above 800 without really ever trying.

    1. Nicely done and good use of credit, FF. When I was in college and saw the interest rates on credit cards I was afraid to do anything but pay them off in full as well and, just like you, I was able to build very good credit at a young age.

      Thanks for sharing!

  5. Very true. Credit card interest is insidious. It starts small but then it grows and it’s hard to get out of. But even for folks who pay off their balances every week and use CCs to get points/cash back, there is the danger of over-spending. If someone is getting 2% cash back but overspends by 10%, the rewards program is still not worth it. I hope and think that we’re responsible enough, though. But I have considered going on a cash-only diet for a while to find out. 🙂

    1. That’s a good point, ERN. We budget and track expenses and keep a close eye on where are money is going so in fairly confident my spending has not been inflated in order to maximize rewards but I can see how some folks would be impacted by that.

      Thanks for the comment!

  6. I’m always torn when discussing credit cards. When used responsibly, they can be a great tool. They automatically track your spending and give you a record of everything you’ve purchased. They provide additional insurance on some products and services. They help protect against fraud relative to debit cards. They can also provide value in the form of cash back or other rewards.

    On the other hand, people that don’t pay their bills in full every month are really hurting themselves, and society has regularly said that this is a-okay. This can easily lead to people developing really bad habits that can be extremely tough to break without quitting credit cards altogether.

    I didn’t have credit card issues because I preferred using cash (for reasons that I cannot recall) when I was younger and my increase in credit card use came about at the same time as my increase in financial literacy. I’ve seen so many smart and otherwise responsible people fall into that debt trap, though.

    1. Great points, Matt, definitely calls for improved education on the product, especially for young folks.

      I guess I wasn’t all too different from you… When I was in college I used checks for most everything… Gosh I feel old writing that!

  7. When Mr. Picky Pincher and I got married we had $14,000 in credit card debt. We managed to pay it off within a year while changing our lifestyle dramatically.

    We now know how to use credit cards as a tool to our advantage. In fact, we put all of our monthly expenses on a rewards credit card, pay it off in full at the end of the month, and reap the rewards.

    That said, I agree that credit cards are NOT for everyone. You need to be quite financially stable to use these little guys without getting into trouble. The balances must be paid off each month. Otherwise you’ll end up in a big, heaping mess!

    As far as avoiding credit card debt in the first place, this is what worked for us:

    1. Cut expenses dramatically. No eating out, less driving, no shopping, make a menu, use coupons, no movie theaters, etc.

    2. Build up an emergency fund. I wasn’t too well-off after college. I was only able to save $20 a month. But guess what? Over time that became $600, which saved my ass when I faced a financial emergency. That meant I avoided $600 of credit card debt since I had cash.

    3. Pay off any credit card debt.

    4. Use credit cards to your advantage. As long as it’s a rewards card and it’s paid off EVERY month, credit cards can be awesome.

    1. Wow kudos to you folks for righting the ship so quickly! And I appreciate the pointers and guide to do so.

      I’m sure that was key establishing an emergency fund at that point to avoid getting back into the credit card debt trap.

      Thanks for sharing your story!

  8. I’ve used credit cards since college and absolutely overspent because of it. Luckily I didn’t damage my credit score, it actually helped it because of longevity of credit accounts, paying on time, etc. And now we’ll put everything we can on our credit card for the rewards and ease of tracking spending, but pay the balance monthly.

    But I absolutely understand how people get into major trouble. And it’s more than credits cards – its so easy to finance vehicles, boats, rvs, motorcycles, atvs. And many people focus on the monthly payment vs. the overall cost when you’re said and done. Great food for thought, thanks for sharing. 🙂

    1. Oh no! Thankfully it doesn’t sound like you drove up too much credit card debt at that time. Glad that worked out week though.

      Good point too on financing all those toys, I can totally see how people would focus solely on the payment and fitting that into budget but losing sight on other more important personal finance goals.

      Thanks for the comment, Kelsey!

  9. I’ve always been super careful with my credit card and luckily, have never had consumer loan debt. Like someone else above mentioned, I have a similar story. Got my first credit card my freshman year of college. Had no idea how cards work, but my mom said, use the credit card but you have to pay it all off every month. Been doing that ever since. The great thing about doing that is that my credit history is pretty good. I’ve consistently had an 800+ credit score simply because the average age of my credit is pretty good.

    I still use my credit card for every purchase I make since I want the points and find it makes it easier to track my purchases.

    1. Nicely done, Panther! I use my credit card for every purchase I can as well (paying it off in full every month) to max rewards. Thanks for sharing your story!

  10. Good read this.

    It is unfortunate that lack of self discipline does not allow more folks to reap the benefit of credit cards. They can offer much in terms of free experiences if used correctly. We put as many of our regular expenses on cards as we can. And we have built a few hundred thousand points in 1 year with mainly the free points plus our added expense items. Free travel and hotel stays can be quite straightforward.

    Paying off our credit cards on monthly basis has both our scores >800 and that is nearly 20 years strong with that habit.

    Self discipline, self discipline…..

    1. True, true! Hopefully more folks will catch on and improve their financial literacy. There is definitely a lot to offer by responsible usage. Thanks Mr Pie!

  11. We use credit cards to pay for almost everything, but we also pay off the bill in full every month. We’ve been doing this for as long as I can remember.

    That said, I know quite a few people who have gotten into real trouble by charging up credit cards to pay for stuff they couldn’t afford. Then they would use one card to pay another. Next thing, they are so far in debt, there aren’t many options.

    And it all started at an early age. At least when I was in college, they were handing out credit card applications everywhere. It was too easy to get a card. And for the most part, we didn’t even have an income stream as we were still in school.

    If you can’t handle it, you really need to stay away from using credit cards.

    1. Yeah for sure, Slacker. Hopefully the approval process for cards has become a bit more stringent than back in the day, but it certainly seems pretty easy still. Thanks for the comment!

  12. I didn’t get my own credit card until I had my first salaried /real job. In college my dad gave me a card for gas, which I used for… gas, to get home from college on weekends. (Back when I could fill up the tank for $10!). The big push for me to get a credit card was EZ pass, due to the tolls on my commute. I pay it in full every month.
    The one time I couldn’t, I called the credit card company, completely stressed out, and I’m sure the person on the other end of the phone was rolling their eyes. I was working a job in Ithaca, for a company that knew they were moving. They put us up in a hotel, but we had to put it on our card and they reimbursed us on Fridays. The bill was due on a Thursday, and still being early in my career I did not have a large enough saving stock pile to cover it. By making the call, they were willing to waive the interest, 🙂 and the balance was paid in full 2 days later. I have a much heartier savings account now.
    Because I pay it off I try to maximize rewards, and as mentioned above it makes tracking spending easier. Although I haven’t needed to use it, the fraudulent purchase protection is better with credit than debit cards.
    A friend posted about paying off their balance so they could then put car repairs on that credit card. 🙁 I agree it isn’t for everyone.

    1. Oh well that was a nice accommodation by the card company to waive the interest a couple days. Good for you for thinking ahead to call and ask!

      Thanks for sharing, Jacq!

  13. I used to be surprised that the credit card companies still offered these great rewards to people with great credit scores and a high propensity to pay it off each month. It would almost seem to me that the rewards would cost them more that the merchant fee’s.

    I can say that although I am still over $1,000,000 in debt, none of it is credit card debt. Doesn’t make paying it off any easier but at least the interest rates are better.

    1. Yeah I’m surprised they provide the cushy rewards too, but I do love taking advantage of them!

      Wow, that’s a heavy debt load Dr! I imagine some is student debt and some being a home mortgage then? Best of luck getting out asap.

      Thanks for sharing!

  14. I love my credit card. I use it to pay for everything now. Since I pay it off each month it’s a great way for me to get cash back and track all my expenses via personal finance. I have two credit cards. One for international travel and one every day expenses.

    It works well for me but I have friends that have no business using credit cards because of all the debt that they have. It’s like any good tool. It’s only as useful as the users.

    1. That’s a good way to sum it up, Mustard Seed! It seems like many cards are offering good overseas benefits for international spending. Is there something specific about the international card you have that you like?

      Thanks for stopping by!

  15. I’ve been seeing a product that’s coming up in 2017 that there will be a 3% cash back on a DEBIT card. I was surprisingly shocked and may even stop using credit cards altogether for the 3% cash back debit card. I haven’t researched enough to see the downside of using them though, so I will do further due diligence down the road.

    Maybe this is the product that lowers some of the consumer debt that’s plaguing Americans!

    1. Oh interesting! Thanks for sharing that info. I wonder if there we’ll also be minimum deposit account balances or other restrictions for it. But yeah that could be a good solution. Thanks for the comment, Finance Solver.

  16. Mustard Seed Money hit the nail on the head: credit cards are tools, and if you know how to use them responsibly they can produce great results. If you use them incorrectly they can cause great damage. When used as a convenience payment mechanism simply to avoid carrying cash, to track expenses, and to accrue cash back or travel rewards, the user is the clear winner. But when they are used as a finance mechanism to buy stuff that you can’t currently afford, they are incredibly dangerous.

    1. Definitely! It’s a shame more folks don’t see the light early on or are given the appropriate financial teaching to help them understand.

      Thanks for stopping by, Joe!

  17. I use Discover for the reward points and it seems to work out. I pay it off every month though. I also have it set up with a $35 monthly minimum payment which it automatically takes out of my bank account if I forget to pay. This way I never pay late fees.

    1. I have never had a Discover card but couldn’t you set up the automatic payments to pay in full monthly rather than the minimum $35?

      Thanks for the comment, Patient Wealth.

  18. Hey JW. I completely agree with the premise of your article, the benefits of credit cards for the wise are paid for by the unwise actions of most others. We don’t have a credit card and probably never well – it works for us. It definitely makes us want to spend as little as we can.


  19. Credit cards, like other financial tools, can be used for both good and bad. Credit is a key fuel for the economy and industries thrive on it – they know how to manage it but average consumer may not. Smart FIREd folks use it for rewards or for short term emergency spending need, which is the right way to use credit in my view.

  20. My wife & I pay ours off in full each month. We review our purchases once a week to make sure we are not overbudget. We had talked about tearing it up and only using debit & cash, but, we have never missed a payment in the 10 years either of us has had a card.

    Plus we have a hotel rewards card, so we get one free anniversary night each year, plus any accumulated points. And, alothugh we do not plan to have anymore loans once our mortgage is paid off, as I’m only 30, having an active credit profile is still a good idea just in case we need to get a car loan, etc.

  21. It’s is interesting how credit cards are heavily marketed to the masses. There are so many people in society that do not understand money or how to manage their personal finances. It is also interesting to me that credit cards often have higher interest rates than any other form of borrowing money. From my view, it seems that wall street purposely targets these people to get their into their debt trap, where they can collect huge interest and fees to the point where these people have a hard time getting out. It really is too bad. We need more financial education in the school system.

    1. Yeah you’re right on with that, YFM. Strange how the credit cards most profitable customers are those folks without the financial literacy to know how to use them appropriately…

      Thanks for the comment!

  22. I’ve never had any issues with paying off my credit card in full each month, and that’s how my parents taught me to use it – like a debit card. The only difference was that your money is taken away later in the month rather than right away. I also hate the thought of having to pay interest on something that I’ve already purchased. I can see how people easily fall into the trap of accumulating more and more credit card debt though. You make one mistake, then it all starts to pile up, and you either try to forget about it or assume that there’s no way to recover at that point. When you owe a lot of money it’s definitely not a pleasant thought.

  23. I’ve had my fair share of bad financial experiences when it came to credit cards however nowadays, it seems like it’s also a necessity to purchase certain items. I’ve switched to a prepaid credit card so that I have control over it and won’t be tempted to do anything else like going for a loan when I can’t pay my credit card bill.

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