6 Reasons Why Too Much Debt is Costly

By Dylan Tansy, America Saves Intern

If you rely on credit card, you most likely have debt. When talking about debt, many Americans immediately think of mortgages, student loans, and car payments. While these are certainly costly debts, credit card debt is the most common form of debt Americans have today.  Americans spend well over $75 billion a year just on credit card interest and fees alone. While many people experience firsthand the stress of constant bills and payments, it is important to understand how else debt can affect you, your life, and your future.

  1. Compounding interest increases the amount you owe and keeps you in debt longer – Every loan and credit card has an interest rate. The amount you owe will constantly be increasing, and can make you pay thousands more than your original loan. If you have a $3,000 credit card balance at 19.8%, and you pay the required minimum balance of 2% of the balance or $15, whichever is greater, it will take 39 years to pay off the loan. With accumulating interest, you will pay more than $10,000 in interest charges. Check out this website to see the power of compounding interest.
  2. High debt affects your credit – Credit card debt is one of the main factors on your credit report. Your credit score is used by financial institutions to determine your eligibility for a loan, as well as your interest rate. Ideally, you want to keep a balance that is less than 25% of your available credit. To learn more about how debt affects your credit report click here.
  3. Too much debt makes it harder to get loans for a car or home, and even make it difficult to rent – Having poor credit has real impacts on your life. If you ever want to buy a car or own a home, you could have difficulty qualifying for a loan. Even renting a place to live will become more difficult when your landlord checks your credit report.
  4. Loans you do get will have higher interest rates – If you do manage to get a loan with poor credit, the lender will give you a higher interest rate. This will increase the total amount that you will have to pay over the duration of the loan.
  5. Too much debt makes it harder to get a job – These days, even employers like to look at your credit report. Responsible money management is an indicator of the responsibility of the person. If you’re looking for work, too much debt can definitely stand in your way.
  6. People with debt lack peace of mind, causing stress that affects both health and relationships – Debt can be a scary thing, and many people with debt spend a lot of time worrying about making payments. The number one cause of marital problems is conflict arising from financial issues. Debt causes stress that can seep into every aspect of your life, affecting health, relationships, and the wellbeing of your children.

Additional articles to help you manage debt: 

6 Tips to Help You Reduce Credit Card Debt
Dig Yourself Out of Debt Action Plan
9 Tips to Help You Pay Off High Interest Debt


Debt can be a huge burden, but there are always ways to make things better. Let America Saves help you reach your savings and debt reduction goals. It all starts when you make a commitment to yourself to save. Take the first step today and take the America Saves pledge to save money, reduce debt, and build wealth over time. And it doesn’t stop there. America Saves will keep you motivated with information, advice, tips, and reminders to help you reach your savings goal. Think of us as your own personal support system.

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