How does carrying a credit card balance affect you financially?

Carrying a credit card balance means you pay interest on the unpaid amount, typically at rates between 20% and 30% APR, which is extremely expensive debt. A $1,000 balance at 25% APR costs you roughly $250 per year just in interest, and minimum payments are structured to keep you in debt longer while maximizing interest paid. It also hurts your credit score by increasing your credit utilization ratio, which lenders view negatively. Over time, the compounding interest can cause your balance to grow faster than you pay it down. The money spent on interest is essentially wasted, reducing funds available for savings or investments. Consistently carrying a balance is one of the most costly financial habits people maintain.