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Being in credit card debt is no fun. As you quickly find out, credit cards have extremely high interest rates. The average rate on cards that are charged interest is a staggering 23.37%, according to the Federal Reserve.

At that interest rate, $10,000 in debt would cost you over $2,300 per year. And unfortunately, interest charges aren’t the only way credit card debt could cost you.

1. It could lower your credit score

If you have a large amount of credit card debt, it could be hurting your credit score. One of the most important scoring criteria is your amounts owed, and specifically your credit utilization. That’s the percentage of your credit limits you’re using.

Let’s say you have $7,000 in credit card debt and $10,000 in total credit limits on your cards. Your credit utilization would be 70%, which would be bad for your credit score.

Lower is better for credit utilization. As a general rule, it’s recommended to stay under 30% utilization to avoid damaging your credit.

When you’re deep in credit card debt, one of the best ways to get out is a balance transfer card. This type of card lets you refinance your debt and pay it down interest-free for an introductory period. Check out our list of the best balance transfer cards for 0% intro APRs lasting as long as 21 months!

2. Getting a mortgage is harder and more expensive

Credit card debt is a serious problem when you’re planning to buy a house. For starters, it could be harder to qualify for a mortgage. Mortgage lenders will check your credit score, and if that’s too low because of your debt, they may not approve your application.

They’ll also check your debt-to-income (DTI) ratio — your monthly debt payments compared to your income. Many lenders won’t approve you for a mortgage if your DTI ratio with your housing payment will be higher than 36%.

Even if you can get approved for a mortgage, you may get stuck with a higher mortgage rate. This can cost you tens of thousands of dollars or more. Let’s say your credit card debt is the difference between getting a rate of 7% and 7.5% on a $300,000 home loan. Over a 30-year mortgage, that extra 0.5% would cost you nearly $40,000.

3. It ties up money you could be saving or investing

There’s also an opportunity cost to credit card debt. The money you spend on it is money you can’t use for other financial goals.

For example, you have $10,000 in debt at a 23% interest rate. If you pay $500 per month, it will take you just over 25 months to pay off. If you’d been able to put that money in an investment account or a high-yield savings account instead, you’d have $12,732 plus all the interest you earned on it.

What to do about credit card debt

It’s frustrating to be in credit card debt. But all the hidden costs are good motivation to pay it off as quickly as possible. Here are some tips to do that:

• Go over your monthly expenses and look for places to cut back on your spending.
• Increase your income by picking up extra shifts at work or starting a side hustle.
• Put as much money as possible toward your credit cards every month.
• See if you can get a balance transfer card to save on interest.

Do all that, and you’ll make faster progress on your credit card debt. Remember that the more you pay toward it per month, the sooner you’ll be debt-free.

If you’re not in credit card debt, the best thing you can do for yourself is to keep avoiding it. Pay your credit card balance in full every month by the due date. You won’t be charged interest if you do this. You’ll be able to reap the benefits the top credit cards offer, without the cost of interest or the stress of credit card debt.

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