According to a study by Ohio State academics, people are more stressed about high-interest credit card debt than first mortgages and credit lines.
The researchers presented a straightforward example to demonstrate the severity of credit card stress.
Here are a few more reasons why credit card debt is more stressful than other types of debt.
It takes a lot of work to escape credit card debt.
It's difficult to escape credit card debt, and it's more distressing than other types of debt. You might use credit cards again after paying them off. You will receive debt collection letters, calls, and threats.
There are two methods for getting out of credit card debt.
Although you shouldn't use the card until it has been fully paid off, you can still access your account. Choosing this route might reflect positively on your credit report.
Credit card debt is often challenging to handle because its interest rates are higher than those of different types of debt. Your finances will also suffer if you have high-interest debt like credit card debt. The most important rule to remember when formulating a long-term debt management plan is: Which will cost you more over time?
Andrei Vasilescu, Co-Founder & CEO at DontPayFull, said,
“The stress often comes from spending small amounts that add up to big lumps of money. The more you spend, the higher your payments get. Not all cards are made equal, and interest rates vary depending on a few factors, such as credit score.
If you cannot make the payments due to job loss or a change in circumstances, the best action is to call the company immediately. Many of them work with the consumer to lower their monthly payments.
This isn't a guaranteed outcome, but it does happen often. Your last solution would be to file for bankruptcy. It's important to consider all options before this as this can affect your financial status for years to come and your credit standing.”
Lorien Strydom, Executive Country Manager, Financer.com, said, “credit card debt is notoriously difficult to escape. Not only are the interest rates high, but credit card companies also have a reputation for aggressive collection tactics. If you're already struggling to make ends meet, the last thing you need is to be constantly harassed by phone calls and threatening letters. The stress of credit card debt can quickly become overwhelming and can even increase health risk factors. In addition, constant financial anxiety can take a toll on your personal relationships.”
Anytime Estimate has just released a study showing that 46% of Americans now have credit card debt, with an average balance of $6,093.
The study also found that 80% of people with credit card debt also have another kind of debt. This makes it hard to pay for an emergency out of pocket.
Because of the high-interest rate, credit card debt is far more stressful than home mortgages or auto loans. These are secured, so the bank can take your car or home if you don't pay back one of them. But a credit card is a short-term unsecured debt, so the bank can't take back the stereo system you bought with it.
Payday loan interest rate is higher than credit cards. The average interest rate is almost 400 percent, which is unaffordable for most people. The highest interest rate can go up to 500 percent.
Many credit card companies offer repayment plans, but payday loan companies directly withdraw money from bank accounts. That is enough to impact your mental and physical health.
Undoubtedly, these loans are more stressful for mental health than credit cards. They create an undue financial strain for people, making it tough to come out of the debt hole. Many borrowers encounter mental health issues when they fail to attain financial freedom.
According to recent studies, having credit card debt as an adult might result in a loss in physical health, including stiffness and muscle soreness.
Additionally, it might result in poor mental health with high stress and anxiety levels. These health issues can complicate daily life and make it more difficult for certain people to maintain or find employment.
This could make it more difficult for a person to repay bills and fulfill other financial commitments, resulting in a debt spiral.
Credit card debt's other impacts could harm one's health. The possible inability to pay for healthcare, prescriptions, or simply budget for healthy food are just a few effects of debt.
Skipping checkups with the doctor or preventative treatment can also raise the risk of developing numerous illnesses, such as cancer, stroke, and cardiovascular disease.
Does credit card debt cause mental illness?
Other studies show that increased stress makes people less self-controlled, makes them spend more, and messes up their ongoing financial problems.
Every day, I meet clients who need help managing credit card debt. They keep asking me, “what are the ways to manage credit card debt,” and “how do I manage credit card debt? What is the best way to pay off credit card debt?” For them, I have only one answer.
Explore the following debt relief programs, call 800-530-OVLG to understand their features, and then make the final decision.
A debt consolidation program can help you repay unsecured debts with the highest interest rate if you control your spending habits.
If the new monthly payment plan has a lower interest rate than your credit cards, consolidating your debt is perfect. This can lower interest expenses, eliminate late fees, simplify payments, or accelerate the payout process.
This program is suitable for young and old adults as long as they can save extra monthly money to repay creditors with a lump sum payment. It helps you save on interest charges, late fees, and outstanding balances.
Debt management plans (DMP) combine numerous debt payments into a single one each month with a lower interest rate. It works best for people who have difficulty making ends meet due to credit card debt but are ineligible for other options because of a low credit score.
DMP doesn't impact your credit score, in contrast to certain alternatives for credit card consolidation. Bankruptcy can be a better choice if debt exceeds 40% of consumers' income levels and cannot be paid off within five years.
A nonprofit credit counseling agency can help you find a debt management strategy. They will offer financial counseling and a budget plan to repay your personal loans.
One effective strategy for managing credit card debt and improving your financial situation is to make extra payments.
You can also borrow money from a close friend or family member to repay your credit card debt. Paying interest is a waste of money. If you're paying hundred dollars a month just in interest, it can feel like you'll never get ahead.
So, if you're planning on paying off credit card debt, you might as well do it with the lowest interest rate possible.
If you have money in investments that you can easily access, you should use it to repay your credit card debt. The amount your money could grow on the stock market might be less than the interest you pay.
A credit card can be handy, but only if utilized responsibly. The urge to overspend is one of the reasons why customers are not making the most of their credit cards and getting into debt.
Some people spend more when they use their credit cards, and the more they overspend, the more debt they accrue. Setting a spending limit is the greatest approach to paying off your credit card debt because going over it negatively impacts your credit score.