Scott Tominaga Offers Insight Into Why and How Over-reliance On Credit Cards Can Hold Back Individuals From Reaching Their Financial Goals

In the landscape of personal finance, the use of credit cards has become a staple of the modern world. Aside from offering a secure and convenient method for transactions without the need to carry cash, credit cards provide great opportunities for earning rewards, and cashback while helping build credit scores. However, over-reliance on credit cards and their unwanted use can significantly impede an individual’s ability to accomplish their financial goals as per Scott Tominaga. Discussed here are five key reasons why using credit cards might be a cause of holding individuals back:

1. Accumulation of Debt

Among the significant limitations of using credit cards is their potential to amass debt. Typically, most credit cards attract extremely high interest rates, which can quickly add on to due balances, making them a terrible figure, if not paid within the due date of each month. Also, the temptation of individuals to make only minimum payments can result in a scenario where the balances multiply faster making it hard to be repaid. Not only does the debt buildup divert funds that could have been saved and invested productively but also paying off substantially high interest payments erode one’s financial stability.

2. Impact on Credit Score

While sensible use of credit cards is likely to improve the credit score of an individual, their misuse can have just a reverse effect. Higher credit card balances compared to the credit limit, delayed payments, or too many inquiries can impact negatively on credit score. A lower credit score can lead to higher interest rates on mortgages and loans, and destroy one’s creditworthiness to lending institutions.  Consequently, this can hold back an individual from reaching their financial goals like buying a dream home or funding for a kid’s higher education.

3. Impulsive Spending

Simply because credit cards are easy to use, they tempt people to meet their desires of shopping for costly things without paying upfront, leading to a lack of financial discipline says Scott Tominaga. The impulsive act is likely to upset the much-needed budget planning, leading to outlays that weren’t planned initially or go beyond affordability, diverting funds away from savings as well as investments that are contributory to achieving financial goals.

4. Limited Growth of Savings

Carrying credit card balances and the trend of paying only minimum balances make credit card holders pay accrued interest on unpaid balances and thereby, eat away a considerable portion of their income. This leads to low cash flow and a lack of funds needed for savings and investments. When finances go toward paying credit card debt, individuals lose the opportunity to invest their savings into assets and different investment vehicles like bonds, retirement accounts, or real estate that could grow wealth down the way and obstruct them from achieving their long-term financial goals.

5. Financial Stress and Anxiety

The mental impact of carrying credit card debt and its consequences can be devastating. The anxiety, strain, and tension caused by mounting interest payments can take a toll on one’s overall well-being. Financial stress can be a cause of poor decision-making, further aggravating debt issues and impacting professional and personal life. This also can affect one’s ability to focus on and work toward reaching their financial goals, leading to a vicious cycle of trauma and financial mismanagement.

Although credit cards can be a handy financial tool, misusing or overusing them can hinder the possible advancement of individuals toward achieving their financial goals. To avoid this, use them judiciously, and only when it is an emergency, and also make sure to pay off balances in full so that the excess money spent on paying mounted interest can be used towards savings and investment.