Interest Cost

• Unless you pay your credit card bill in full every month, you have to pay interest on your purchases. This interest adds up over time and increases the overall cost of a purchase. For example, if you use a credit card with an 18-percent interest rate to spend $1,000 on a new entertainment system and pay only the minimum, the Federal Reserve calculator estimates that it will take you eight years to pay it off and will cost you $863 in interest.
  
  

Commit Future Income

• When you buy something with a credit card, you are committing part of your future income to repay that debt. If you make a habit of buying with credit, your bills will eventually be a significant monthly expense for you, often long past the time when you stop using the items you bought. If you run into financial problems in the future, such as the loss of your job or unexpected medical expenses, you might not have as much money as you expected to pay your credit card bills.
  
  

Spend Beyond Means

• Because credit cards are so easy to use, you will often swipe your card without even thinking about whether you can actually afford to buy the item. According to Cornell University economics professor Robert Frank in a 2008 National Public Radio interview, individuals spend more on a credit card than they do with cash. This is likely because when you use cash or a debit card, the money leaves your wallet or your bank account immediately and you feel the loss right away.
  
  

Hurt Credit Score

• Although using a credit card can help you build a positive credit history, it can also severely damage your credit. If you cannot pay your bills on time, you will have late payments on your credit report. Your account could even get sent to collections, which will hurt your credit score even more. Your credit score also considers the amount you owe and the ratio of this amount to your credit limit. The higher your ratio, the lower your credit score will be. Your credit score affects your chances of approval for credit in the future and the interest rate you will pay. It is important to keep your score high so you can borrow when you really need to.