In this crucial episode of Money Talk with Tiff, Tiffany Grant dives into the seldom-discussed topic of how credit cards can significantly influence our mental health. She unpacks the history of credit cards, discusses the psychological effects of spending with plastic, and gives practical advice on managing credit card use to foster financial and mental well-being.

Timestamps:

[00:00] Competition spurred credit card innovation, global convenience.

[06:36] Credit card debt causes financial stress and strain.

[09:31] Creating a budget is crucial for financial stability.

[13:04] Use credit card regularly, pay off immediately.

[14:41] Get help with credit card debt wisely.

Key Points:

• The origin of credit cards and their evolution since the 1950s.
• The psychological differences between spending with cash versus credit.
• Benefits of using credit cards, including building credit history, rewards (with a cautionary note on their use), and fraud protection.
• Personal anecdotes about how credit can be advantageous when used responsibly.
• The stress and anxiety associated with credit card debt, backed by studies highlighting the correlation between debt and decreased mental health.
• The role of money management in personal relationships and self-esteem.
• Strategies to stay in control of credit card use, such as budgeting, spending tracking, and setting spending limits.
• The importance of paying off balances each month and keeping utilization low to improve credit scores.

Resources:

• Blog post on budgeting with a video walkthrough of the budget spreadsheet (free download).
• Budget Nirvana course, which delves deeper into budgeting strategies and mindset.
• Need personal help with credit card debt management? Schedule a free 15-minute consultation with Tiffany.
• Get YNAB to start your budgeting journey
• Do you know when you will be debt-free? Get Debt Payoff Planner to find out!
• Navigating a Mountain of Credit Card Debt: Tips for Debt Management and Recovery | Ep. 298
• Tiffany's Take: Is There Such Thing as Too Much Debt? | Ep. 179

Call to Action:

• Reflect on your relationship with credit cards.
• Consider necessary changes to enhance your financial health and mental well-being.
• Get help if you're struggling with credit card debt.
• Engage with Tiffany through social media or email to share your experiences.

Reminder:

• If you have a question for Tiffany to answer on the podcast, submit it at www.moneytalkwitht.com/asktiffany.
• Don’t forget to like, subscribe, share, rate, and review the podcast.

Social Media: Follow @moneytalkwitht on all platforms for updates and financial insights.

Contact Information:

Website: www.moneytalkwitht.com

Submit Questions: www.moneytalkwitht.com/asktiffany

Social Media: @moneytalkwitht

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Copyright 2024 Tiffany Grant

You know what it is. That's right. It's time to talk money with your money

nerd and financial coach. Now tighten those purse strings

and open those ears. It's the money talk with Tiff

podcast.

Hey, hey, and welcome to Tiffany's take, where I answer

your questions right here on the podcast. If you would like your

question answered, just go to

www.moneytalkwitht.com

axtiffany, and I'll be more than happy to answer. So for

this episode, I've been getting a lot of people reaching out

about debt, particularly credit card debt,

and how it has been stressing them out, affecting their mental health, so on and

so forth. And so I wanted to do an episode on the impact of

credit cards on mental health because I feel like it would

be helpful for everyone. At this moment. It

seems like there's so much credit card debt out there

right now, and we, you know, the whole keeps

getting deeper and deeper. Trust me, I'm. You're not

alone. If you're listening, I have credit card debt as well.

But I wanted to do just, like, a brief overview of the history

of where credit cards came from, the good side of credit,

why it becomes stressful, and then how to manage better.

So without further ado, let's jump right in. So, first and

foremost, back in the 1950s, there was a

situation where this guy named

Frank McNamara, he was at a restaurant,

and he realized that he didn't have his wallet. And so he was

like, dang. Like, I really want some food. How can I pay? Is there a

way to pay without cash or checks on hand? And so

from that moment of embarrassment, that's when he created the

diner's club card. So this was back in 1950, and

it was just a card that allowed the members to charge their meals at

27 restaurants in New York and then pay the bill

later. So kind of think of it as, like, a membership

card, right? And so then other companies started

catching on. And so in 1958, that's when bank

of America launched the bank Amerit card, which would

eventually become visa. So Visa was the first one, and that

was the first revolving credit card issued by a third party

bank that was valid at multiple merchants. So, unlike the

Diners Club, which required full payment of the bill each month, the bank

Americard, aka Visa, allowed you to carry

a balance, transforming how we all managed our

money. So then after that, in 1966,

was when interbank card, which is now known as Mastercard,

came into the picture because, of course, they see, oh, Visa

is making money. Bank Americard is making money. We want to make money, too.

And so this is when they stepped in. Now, this

competition spurred innovation, leading to the credit card system that we know

today, a global network of financial convenience.

So that's kind of how credit card started. So if we

look at that and we look at the phenomenon that's going on now, when

you see, like, buy now, pay later type situations, which

is running rampant, it all started from

a place of needing to get something or wanting to get

something and not having the money to actually get it

right then and there. So nothing really has changed over

the years as far as how credit cards

are used or how people use them. And I'll

also add that once credit cards were

introduced, then it also took away,

you know, you having to physically count out your money or

physically write a check, which psychologically

is different than if you're just swiping a card. Because when

you are counting out money, you actually feel

it. You see it leaving your hands when you're swiping a

card, that does not happen. And so it's easier to swipe

than it is to hand over money. And to prove that

point, next time you go, let's say, to the grocery store or what have you

use cash and see how different that feels than you just swiping

your card. And so with all of that,

these companies realized that they could make money doing this.

Now, don't get me wrong, there is a good side of using

credit. So, of course, we all know you can't have credit until you have

credit. And so, you know, if you ever

wanted to get a house and you didn't have cash for a house or get

a car, you don't have cash for a car, you're going to need credit.

So building your credit history, also the convenience,

sometimes, you know, just having a card on hand, the

rewards. And also, I'll put a asterisk

there with the rewards because that was also

a marketing ploy for the companies to make more money.

Now, if you use it responsibly, then cool, it'll work out

for you. But if you don't, then that's just a way for them to

get you to spend more on the credit card. Therefore they can charge

more interest, therefore they make more money, and so on and so forth. So I

just wanted to throw that out there, too. But also protection against

fraud. So if you don't know, like if you use your debit card,

for instance, it's a little harder to get your money back than if you use

a credit card. When it comes to someone using your

card without your permission. So if there's any fraud

involved, it's easier to get your money back with a credit card than it

is with a debit card. So also that's a good sign of credit

as well. So I've also talked about on

the podcast before back or way early. I think it was

like one of my first episodes, maybe like four or five. Anyway,

I talked about how I used credit to help get my son's

braces when his dad had backed out at the last minute with his half of

the money. And so there are situations where

credit can come in handy, and you can use it responsibly

to get things done that need to get done, but you

also don't want to use it as a form of income. You

want to use it as a tool to get what you need. So that's kind

of how I look at credit, is using it as a tool

to get whatever it is that I need and not as income.

So when you think about it in that way, it makes you spend a

little differently. Now, let's go into the

stress that can come with using cards. So

when you use credit cards, you know, at first it's all

good. You know, you're like, oh, I just got these shoes, or, oh, I just

went on this trip, or whatever the case may be. But

later on, as you're starting to pay down that bill,

you realize and you start getting stressed out or anxious

about this mountain credit card debt. Because if you haven't

noticed, with the rise in interest rates over the past year

or so, it seems like these credit cards are going anywhere. And

especially if you're paying just the minimum balance I've had, I have

cards where they're actually increasing in balance even though I'm

paying them. So it can feel like a never

ending hamster wheel, you know, once you start going into

that cycle. And also

because, you know, I talked about how easy it is to spend on credit

cards that can lead to financial strain, that

can lead to financial stress, and then that can

lead into our mental health and well being, being

affected. So I know it's easy for me to talk about it, but let's look

at the data. So a study published in the Journal of Family and

Economic Issues found that individuals with higher levels of credit card

debt reported higher levels of stress and lower well

being. The numbers don't lie. They tell stories of sleepless

nights and anxious days. Another study

from the American Psychological association. So

APA found that about 72%

of Americans report feeling stressed about money, at least some

of the time during the month. Now imagine the added

strain when credit card debt enters the mix. It's like the shadow that

follows you, affecting your mood, your relationships, and even your self

esteem. I can tell you firsthand just

working with different couples and also in my

situations as well, that if your money's not right,

your mood's not right. If your mood's not right, your relationships are not right.

So that is why this is so important in

getting things under control, because money can

affect a lot of things, and relationships can be one of the

casualties. Another compelling piece of evidence comes from

a survey conducted by the National foundation for Credit Counseling. I've talked

about them before, but they revealed that individuals

with debt are more likely to report feelings of depression and

anxiety. So these aren't just fleeting emotions for

some, they're constant companions. And so

that's why this is super important.

Now, let's get into now, I know that sounded doom and

gloom so far, but let's get into some

practical tips to manage credit card use better and

to have a better effect on your mental health. So first

and foremost, creating and sticking to a budget. I know you all

are tired of hearing me saying that, and I don't care, but it's so important

to have that set up. And even if you

don't stick to it, um, just having that

awareness of how you're spending your money, how much you actually

have to use so you don't have to use credit cards,

is priceless. It's priceless in so

many different ways. So if you have never

created a budget before, I'll make sure I'll put a link in the show

notes for a whole blog post I did on budgeting that

includes a video walkthrough of the budget

spreadsheet that you get for free. So that way you can

do that. I'll also put a link in the show notes for

my budget nirvana course, which goes more into

depth about how to create your budget. All the mindset hacks

and things that I use when it comes to budgeting, so on and so forth.

So make sure you check that out for that information. Check out the show

notes next. You want to keep track of your spending. So this goes hand in

hand with budgeting, but it's so important to keep track of how you're

spending and what you're spending it on. I have learned

that once I go through the process of having my

clients write out everything that they're spending or tracking for that first

month or so, they're like, oh my gosh. Like, I didn't know I was spending

XYZ on this, you know, because if you don't

have that awareness, it's really hard to figure out where your

money is going. And I like to use the analogy of a boat. Let's

say you're rowing a boat and all of a sudden you see water

starting to come into your boat. You don't know where the money is coming from

because there's no huge visible holes. But what's

happening is there's little small holes. And I

equate that to small holes in your budget. When you don't keep track of your

spending, you don't know what's going on. All those little small holes

can sink your ship. And so you want to make sure that you're keeping

track of what you're spending on and how you're spending your money.

So that way you can plug up those holes.

Also, if you do use credit cards, set limits on your

credit card use. I know there's some people out there listening like, well, Tiffany, I

love my rewards. Well, I love them for you as long as you use them

responsibly. So set limits on how you use your credit cards.

When you use your credit cards. When I was credit card debt free, I only

use my credit, I literally put my cards in the

freezer. So I put them in water, put them in the back of the freezer.

I took them out my pocketbook so I won't be tempted because know

thyself. And so I did not

unfreeze them but once or twice a year just to make sure they don't

administratively close them. And even when I did use them, it was only

for gas or something small, just so they won't close the card.

So that's another thing too. If you do have credit cards,

make sure that, you know, if you do get on the wave of

not using them, just use them periodically just so they

won't close them. Because if they close them, that could also

affect your credit score. Okay? So keep that in mind.

But yeah, setting limits on your credit card use is super

important. You know, you don't want to be maxed out and in

a situation where you're maxed out and you can't afford to pay it

back because then again, that will affect your

mental health. Also, you want to make sure that you pay off your

balances each month to avoid interest charges. So this is a

misconception that a lot of people come to me about. They're thinking, oh,

well, don't I have to keep a balance on it, you know, in order to

improve my credit? No, you do not. When I was

improving my credit, I would use it and pay it off almost

immediately because I was terrified of credit, and

that worked. So as long as you have them open,

use them periodically, your credit card, your credit

score will increase. The only,

and honestly, I feel like these companies are the ones that

made this up, that you need to carry

a balance because they're the only ones that benefit. So when you carry a

balance from month to month, you pay, pay interest on whatever that balance

is. If you pay it off almost immediately, you don't have to pay any

interest because no balance is being carried over. So

keep that in mind as well. If you're in a situation where you

already have credit card debt and you can't pay it off every month, at least

try to get below 30% utilization, because then

that would have a better effect on your credit score and then also

your mental health, too, if you can keep your balances as low as

possible. It is such a relief. It is

such a relief. Also. I just want to encourage

you all that you want to view credit cards as a

tool so when they're used wisely, they can age you

rather than harm your financial and mental health. And I know I've said that before,

but I wanted to reiterate, credit cards are tools. They are

not income. So you always want to use them wisely. If

you want to get into the rewards game, use it wisely. If you want to

use it for whatever it is, just use it wisely.

Now, I will say that overcoming credit card debt is

challenging, and it can feel extremely

overwhelming. So I do want to let you

know that it is okay to get help. If you need help

with coming up with a plan to stay on track, to

have someone say, oh, no, you know, we're not using a credit card for

that, then get help. And I do

offer one on one sessions with clients, so I'll make sure I have that

link in the show notes as well where we can hop on a 15 minutes

call for free just so I can see if I can help you or

if I need to refer you to a credit counseling nonprofit or whatever

the case may be. But I will say get help if

you need help. Because sometimes, and this

happens a lot with people that come to me, they just take the

ostrich approach and stick their head in the sand. And they're

like, well, if I ignore it, it never happened. And I'm here to tell you

that is not the truth. So stop telling yourself that. And if you need

help, get help, okay? There's nothing wrong with it. And

there's so many people in all different income

brackets that I help with their money. So there's no

shame, no guilt, but we can work together to figure out a

way to get out. Okay? So hopefully that was

helpful. You know, in this episode, I just wanted to go over how credit

cards started, what the mindset was with

the people that started, and then also how it

can negatively affect your mental health or positively if

you use it the right way. So I want you to take a moment to

just reflect on your relationship with credit cards and consider any

changes that you might need to make for your financial health

and well being and also your mental well being. Thank you so

much for tuning in. You can find all the resources that I

mentioned in this episode, plus more in the show notes, so make

sure you check that out. Also, if you would like your question

answered on the podcast, go to

www.moneytalkwitht.com

axtiffany. Also, make sure that you are

liking subscribing, sharing and rating, and

reviewing this podcast because it helps other people find

us. And also, I would love to hear your experiences with

credit cards and mental health via social media or email.

Just let me know how you feel about either

this episode or just credit cards in general. I'd love to

hear. So thank you so much for listening and I hope you all have a

wonderful rest of the day. Bye. Thank you for

listening, joining and being a part of the Money Talk with TIFF podcast this

week. You can check TiFF out every Thursday for a new Money talk

podcast, but if you just can't wait until next week, you can listen to

previous podcast

episodes@moneytalkwitht.com or

follow TiFF on all social media platforms at

moneytalkwitht. Until next time, spend wise

by spending less than you make a word to the money wise is

always sufficient.