How does carrying credit card debt affect my finances?

Carrying credit card debt costs you money through interest charges, typically at rates between 20% and 30% annually. This means a $1,000 balance could cost you $200 to $300 per year just in interest, and that compounds if you only make minimum payments. Over time you end up paying significantly more than your original purchases. Beyond the direct cost, high credit card balances raise your credit utilization ratio, which lowers your credit score. A lower score makes it harder and more expensive to borrow for things like a car or home. The debt also reduces your monthly cash flow, limiting your ability to save or invest, which creates an opportunity cost since that money could otherwise be growing rather than paying off interest.