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It is always a good idea to charge your credit card only as much as you would be able to pay off. It is also quite important that you are consistent with your bill payments. Maintaining a decent credit history isn't difficult, and all you need to do is be regular and realistic about your expenditure and income. This is because if you miss bill payments too often or keep pushing outstanding balances month after month, your credit history can be negatively impacted. Here are some ways in which your bad credit history can cost you a lot more money than what you would have spent with a good credit or excellent credit.
Higher APR on credit cards
The average debt across the country is about $2000. Credit cards often charge high interest rates on balances, so even if you have a debt of a few hundred dollars, you could end up paying a significant amount of interest if you have a bad credit rating. Every month, this extra interest accumulates and adds up to your principal debt. It is a chain reaction where you will have to pay more interest on that accumulated amount. Therefore it is always a good idea to develop a credit history decent enough to get a low interest credit card, because if you are to carry a long term revolving debt, it is a good idea to pay less interest on it.
Lose out on rewards
Credit card issuers these days are offering a lot of rewards, especially with the holiday season around. On average, customers who are planning to spend around $500 to $600 this holiday season can look to save $100, thanks to the rewards being offered on credit cards. The point to note, however, is that most of these rewards or at least those which are worth utilizing are only offered to those customers with an excellent credit rating. If you have a bad credit history, your chances of getting a decent reward program are very low. You therefore lose out on some savings. Similarly good balance transfer deals which can help you save massively on your interest on outstanding balance for sometimes longer than a year, might be out of reach if your credit score is low.
Higher interest rate on loans and higher premiums
It is not just the credit card industry where your credit rating is important. If your credit rating is low, your insurance coverage and your personal and housing loans become more expensive. As far as loans are concerned, even a decimal point change means you would be paying hundreds of dollars extra in interest over a longer term. Similarly considering that you need insurance for yourself and your family, which provides life coverage, medical benefits, house insurance and vehicle insurance, you are looking at a steep premium if you have a bad credit history. All these costs literally eat into your savings to a great extent.
