Credit cards can be a convenient, and even rewarding, way to pay for purchases. However, they're not all fun and games if you use them too much. Whether you abuse cards by racking up debt you can't handle or charging expenses on cards that aren't yours to use, credit card abuse is no laughing matter.
Credit cards charge very high interest rates, so when you rack up debt that you can't pay off each month, you'll find yourself buried by interest. Especially if you're only making the minimum payment, it can take years to pay off what you owe. For example, according to the Federal Reserve, say you owe $3,000 and your credit card charges you 14.4 percent interest. If you make $90 payments every month, it takes you 11 years and $4,745 in payments to pay off the debt.
Carrying high balances on your credit cards drags down your credit score, which can make it hard to get low interests on credit cards. Plus, if you're trying to get additional loans for school, a house or a car, you might not even be approved at all -- so the only way you're going to become a homeowner is if you save up enough to pay cash. If you've defaulted on your credit cards, it's even harder because your score will be even lower.
As of May 2013, nine states -- California, Colorado, Maryland, Connecticut, Hawaii, Illinois, Washington, Oregon and Vermont -- prohibit most employers from checking your credit report as part of a job application. However, in the other 41 states, employers are free to ask you for permission to check your credit report before offering you a job. You can say no, but the employer can simply not consider your application. If your credit report shows credit card abuse, employers may be hesitant to hire you, especially for jobs dealing with sensitive information or handling money.
If your abuse extends to using other people's credit cards without permission, or trying to rack up charges on cards you've already canceled, the consequences are even worse. Though you might think it's a relatively harmless crime, you might end up behind bars. For example, in Texas, if you use a card that isn't yours without the permission of the owner, you could face up to two years in state jail and a $10,000 fine.
- Federal Reserve: What You Need to Know -- New Credit Card Rules Effective Feb. 22
- U.S. District Court: Credit Abuse Resistance Education Program (C.A.R.E.)
- David Cook Law: Teens and Credit Card Abuse, No Laughing Matter
- Mondaq: Colorado Ninth State to Prohibit Credit Checks for Employment Purposes
- Consumer Financial Protection Bureau. "CARD Act Report," Page 77. Accessed May 13, 2020.
- Discover. "How Is My Credit Card Limit Determined?" Accessed May 13, 2020.
- NextAdvisor. "NextAdvisor Survey: 54% of Americans Find Frequent Flyer Programs Confusing." Accessed May 13, 2020.
- Experian. "Why a New Credit Card May Not Show on a Credit Report." Accessed May 13, 2020.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."