Between their credit cards and their Tinder profiles, many millennials (people who are between 23 and 38 years old) do a lot of swiping - and often without much thought. Swipe for a matcha latte here, swipe on a cute guy there.
As we head into the holidays buying gifts, taking trips, and hosting celebrations, it’s important to think before swiping - especially on extra expenses and hometown crushes. Don’t let the retail shelves filled to the brim with presents and trinkets tempt you too much! The average American charges at least $1,000 to their credit card during the holiday season and is ultimately unable to pay it off immediately. Here are the top three consequences of spending more than you can afford:
- Carrying a balance. The average interest rate ranges from 14% to 19% for cardholders. Failing to pay a credit card balance in full and carrying it to the next month will result in steep interest charges. For example, if you charge $1,200 to your card with a 17% interest rate and only pay the minimum owed (let’s say $40), the following month you’ll owe $1,357.20 instead of $1,160. Yikes! This is definitely worse than the time you accidentally swiped right on the D-list stand-up comedian still living in his parent’s basement.
- Using too much of your credit limit. When you reach or exceed your credit limit, you immediately become a risk to credit lenders. A credit card utilization ratio refers to the amount of available credit being used, and creditors view this information to determine if a consumer is a lending risk. The goal is to keep credit utilization under 30 percent, so just because you have a $10,000 limit does not mean you should spend every penny of it.
- Missing a payment. Payment history is one of the biggest elements that contribute to your overall credit score. Missing a payment will result in a late fee, and the late payment may even be reported to the three major consumer credit bureaus. This detail can stay on your credit report for up to seven years. To avoid late payments, you can set up automatic payments - just make sure there’s enough in your account to be withdrawn when the bill comes due.
Swiping right on the wrong suitor could land you a nightmarish date, but that’ll only last one night; making purchases you can’t afford could affect you for up to seven years! Before you stock up on champagne for your friend’s holiday get-together or click “add to cart” on that sparkly dress for the holiday office shindig, be sure your purchase won’t set your account back - and that it’s worthy of “swiping right” in the first place.