- By 2010, 181 million U.S. consumers will have at least one credit card, according to the U.S. Census Bureau. And consumers aren't shy about using them: The combined credit-card debt of U.S. cardholders stood at more than $972 billion at the end of 2008, according to the Nilson Report. That's up 1.12 percent from one year earlier. Unfortunately, a high amount of credit-card debt can cause serious financial problems for cardholders.
- If you carry a significant amount of debt on your credit card, you can lower your credit score. This can lead to financial problems. Mortgage lenders, for example, rely on credit scores to determine if they should lend money to potential home buyers. They also use credit scores to determine the interest rates and fees they'll charge their borrowers.
The amount of money you owe--including to your credit-card issuers--accounts for 30 percent of your credit score, according to the credit-information site MyFico.com. - If your credit-card debt is high, you're more likely to not be able to pay your minimum payment each month. This may cause a snowball effect: Most credit-card companies charge high penalty fees to cardholders who miss payments. Others raise the interest rate on consumers' credit-card debt when they miss payments.
Both of these scenarios can quickly boost your debt to even higher levels, making it that much harder to cut down those credit-card bills. - If your credit-card debt is too high, you may have little choice but to file either Chapter 7 or Chapter 13 bankruptcy. In either case, you will severely damage your credit score.
A bankruptcy will stay on your credit report for 10 years. During this time, you will struggle to obtain any kind of loan--for a house, car or personal use--without paying exorbitant fees and interest rates. Consider declaring bankruptcy as a last resort. - Emily Starbuck Gerson recounts, on CreditCards.com, stories of people who have attempted or committed suicide in part because they could see no way to pay off their debt. Having a high amount of debt can lead to depression, which may ultimately lead them to thoughts of suicide as one way to escape debt.
Daniel J. Reidenberg, Psy.D., a psychologist and executive director of Suicide Awareness Voices of Education, says that when people suffer from depression, they rarely think logically. Dr. Reidenberg also told Gerson that a history of depression increases the likelihood "that a financial burden will put them over the edge and lead them to an attempt" at suicide.
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