How to Go Into Debt With A Credit Card

While not a recommended financial strategy, understanding how credit card debt accumulates can be instructive. Here’s a look at the common path that leads consumers into significant credit card debt.

1. Select the right card. A card with a high credit limit offers more room to spend, while a low introductory APR can mask the true cost of borrowing. You can use Kudos' explore cards tool to browse options.
2. Spend beyond your means. Consistently charge more to your card than you can afford to pay off. This ensures you carry a balance, which is the foundational step for building debt.
3. Pay only the minimum. By making only the minimum payment, you primarily cover interest charges. This makes little impact on the principal, allowing your debt to compound and grow over time.
4. Disregard the APR. Pay no mind to the Annual Percentage Rate. Once any promotional period ends, a high standard APR will cause your balance to balloon with each billing cycle.

Impact On Your Credit Score

Going into debt with a credit card can have several significant effects on your credit score. Here are some key factors to consider and how they might influence your financial standing.

• Credit Utilization Ratio. This ratio compares your credit card balance to your credit limit. A higher ratio can negatively impact your score, as lenders may see you as a higher-risk borrower.
• Payment History. Carrying a balance increases the risk of missing payments, which is a significant factor in your credit score. Late payments can stay on your credit report for years.
• Overall Debt. High credit card debt increases your total debt load, which lenders review for new credit applications. This can make it harder to qualify for other loans like a mortgage.

Alternative Ways To Go Into Debt

Manual Balance Adjustments

For direct control over an account's debt, you can manually adjust its balance to a negative value. This method is particularly useful for testing environments or initial setup, as it allows you to simulate debt without involving a payment instrument. Within the account settings, you can typically find an option to directly edit the balance. Simply input a negative figure to place the account into debt, giving you precise control over the amount without a card transaction.

Bank Account Overdraft

Alternatively, some systems allow you to enable a bank account overdraft feature. This setting lets an account spend beyond its current balance up to a pre-approved limit, creating debt organically through transactions. To use this, you would first configure the overdraft settings for a linked bank account. This approach is effective for simulating real-world financial scenarios where debt is incurred dynamically as expenses exceed available funds, rather than through a static entry.

Choose the Right Card to Go Into Debt

If you're going to take on debt, do it strategically. The right credit card can be a powerful financial tool, helping you maximize rewards, build credit, and access valuable perks. With nearly 3,000 cards on the market, finding the perfect match can feel overwhelming, but Kudos' Explore Tool simplifies the process, letting you compare options side-by-side to find the best card for your specific needs and spending habits.

To get the most from your cards, Kudos is the essential free shopping assistant for your online purchases. We're also giving you $20 back on your first qualifying buy—just sign-up for free with code "GET20" and shop with a Boost merchant.

Frequently Asked Questions

What happens if I only make minimum payments?

Making only minimum payments significantly increases the total interest you pay and extends your repayment period for many years.

How does credit card debt affect my credit score?

High credit card debt increases your credit utilization ratio, which can significantly lower your overall credit score.

Can I negotiate my credit card debt?

Yes, many credit card issuers offer hardship programs or may be willing to negotiate a lower interest rate.