The True Cost of Carrying a Balance

Carrying a credit card balance makes you more vulnerable to whatever setbacks life throws your way. Every dollar you've charged is a dollar you can't access in an emergency, and your card issuers want at least their minimum payments, regardless of whether you have a job. Credit card debt might not be the primary reason most people file for bankruptcy, but it's certainly a contributing factor in many cases.

If you need more convincing that carrying a credit card balance is a bad idea, let's review a few of the ways credit card companies have devised to part you with your hard-earned cash when you don't pay your balance in full.

Floors But No Ceilings

Most credit cards these days have variable rates that are tied to some short-term rate benchmark, like the prime rate. Theoretically, when the Federal Reserve reduces short-term rates, what you pay on your credit card should drop as well.