Have you ever thought that credit cards are like tobacco and alcohol? Using credit excessively and carrying balances from month to month can be bad for your financial health. Credit cards and credit lines encourage spending beyond your means. Every time you use your credit card you are actually tying up your future income. You must pay last month’s debts instead of saving for the future.

Charging and running up balances on multiple credit cards can easily fool you into thinking in terms of monthly payments rather than total debt owed Too much high interest debt is like financial cancer. Once the debt tumor starts to grow, the interest begins to compound rapidly. At some point, minimum payments and interest charges can begin to hamper your ability to meet your basic living expenses.

Treatment for this financial cancer must be swift and decisive. If the debt gets too large, bankruptcy may be the only solution. Filing bankruptcy is costly and stays with you for many years. It can affect your ability to get a home loan and many other things.

How much credit is too much? Most of us know that too many credit cards and access to too much credit can lead to problems. Examine your credit obligations by listing each of your creditors (do not include your mortgage or rent payment), the amount of the credit line and the total credit used. The information can be found on your credit card statements or contracts. Calculate the available credit to debt ratio by dividing the total credit used by the total credit line. See the example provided.

Does closing a credit card account affect my credit score? Credit scoring is a system creditors use to determine how much credit to give you (if any) and how much to interest to charge. Closing a credit card account could affect your credit score if your available credit to debt ratio is too high. It is very important to calculate your total debt before you close an account. Contact your local University of Florida/IFAS Extension office for more information.