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Why it may be time start monitoring your reliance on your credit card

For the vast majority of Americans, the default mode of payment for virtually everything has become credit cards. Indeed, many individuals would likely have a difficult time recalling when they last paid for something by check or even stopped at an ATM.

While this reliance on credit cards makes sense for a host of reasons from enhanced fraud protection to simple convenience, it's important that this reliance doesn't become too great. In other words, consumers need to remain mindful of their credit card balance.

While this might sound obvious and not altogether concerning, it's nevertheless important to remember that credit card debt can grow much faster than people anticipate.

Indeed, unforeseen expenses -- from a medical emergency to a major home repair -- together with an ongoing list of monthly expenses can cause a once modest balance to jump closer than ever to the limit.

If the notion of having to pay steep interest rates on a large balance for what is likely months on end isn't reason enough to persuade a person to start monitoring their credit card reliance, consider also that the higher a balance becomes, the more damage it can do to a credit score.

Indeed, a credit score takes a number of factors into account, including what is known as a credit utilization ratio. While this sounds complex, it's simply a measure of the degree to which a person is using their available credit. Experts indicate that a credit utilization score that exceeds 30 percent can create problems.

By way of illustration, if a person has a credit card with a limit of $10,000, experts indicate they would be well served not to charge more than $3,000 in a given cycle and, if this is not possible, to ensure that they have the money to pay down the balance by the time the bill arrives.

Above all else, it's important for people to understand that if credit card debt simply spirals out of control despite their best efforts that they do have options, including the fresh start offered by Chapter 7 bankruptcy.   

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