Shownotes
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
Copyright 2024 Tiffany Grant
This podcast uses the following third-party services for analysis:
Chartable - https://chartable.com/privacy
Transcripts
You know what it is. That's right. It's time to talk money with your money
Speaker:nerd and financial coach. Now tighten those purse strings
Speaker:and open those ears. It's the money talk with Tiff
Speaker:podcast.
Speaker:Hey, hey, and welcome to Tiffany's take, where I answer
Speaker:your questions right here on the podcast. If you would like your
Speaker:question answered, just go to
Speaker:www.moneytalkwitht.com
Speaker:axtiffany, and I'll be more than happy to answer. So for
Speaker:this episode, I've been getting a lot of people reaching out
Speaker:about debt, particularly credit card debt,
Speaker:and how it has been stressing them out, affecting their mental health, so on and
Speaker:so forth. And so I wanted to do an episode on the impact of
Speaker:credit cards on mental health because I feel like it would
Speaker:be helpful for everyone. At this moment. It
Speaker:seems like there's so much credit card debt out there
Speaker:right now, and we, you know, the whole keeps
Speaker:getting deeper and deeper. Trust me, I'm. You're not
Speaker:alone. If you're listening, I have credit card debt as well.
Speaker:But I wanted to do just, like, a brief overview of the history
Speaker:of where credit cards came from, the good side of credit,
Speaker:why it becomes stressful, and then how to manage better.
Speaker:So without further ado, let's jump right in. So, first and
Speaker:foremost, back in the 1950s, there was a
Speaker:situation where this guy named
Speaker:Frank McNamara, he was at a restaurant,
Speaker:and he realized that he didn't have his wallet. And so he was
Speaker:like, dang. Like, I really want some food. How can I pay? Is there a
Speaker:way to pay without cash or checks on hand? And so
Speaker:from that moment of embarrassment, that's when he created the
Speaker:diner's club card. So this was back in 1950, and
Speaker:it was just a card that allowed the members to charge their meals at
Speaker:27 restaurants in New York and then pay the bill
Speaker:later. So kind of think of it as, like, a membership
Speaker:card, right? And so then other companies started
Speaker:catching on. And so in 1958, that's when bank
Speaker:of America launched the bank Amerit card, which would
Speaker:eventually become visa. So Visa was the first one, and that
Speaker:was the first revolving credit card issued by a third party
Speaker:bank that was valid at multiple merchants. So, unlike the
Speaker:Diners Club, which required full payment of the bill each month, the bank
Speaker:Americard, aka Visa, allowed you to carry
Speaker:a balance, transforming how we all managed our
Speaker:money. So then after that, in 1966,
Speaker:was when interbank card, which is now known as Mastercard,
Speaker:came into the picture because, of course, they see, oh, Visa
Speaker:is making money. Bank Americard is making money. We want to make money, too.
Speaker:And so this is when they stepped in. Now, this
Speaker:competition spurred innovation, leading to the credit card system that we know
Speaker:today, a global network of financial convenience.
Speaker:So that's kind of how credit card started. So if we
Speaker:look at that and we look at the phenomenon that's going on now, when
Speaker:you see, like, buy now, pay later type situations, which
Speaker:is running rampant, it all started from
Speaker:a place of needing to get something or wanting to get
Speaker:something and not having the money to actually get it
Speaker:right then and there. So nothing really has changed over
Speaker:the years as far as how credit cards
Speaker:are used or how people use them. And I'll
Speaker:also add that once credit cards were
Speaker:introduced, then it also took away,
Speaker:you know, you having to physically count out your money or
Speaker:physically write a check, which psychologically
Speaker:is different than if you're just swiping a card. Because when
Speaker:you are counting out money, you actually feel
Speaker:it. You see it leaving your hands when you're swiping a
Speaker:card, that does not happen. And so it's easier to swipe
Speaker:than it is to hand over money. And to prove that
Speaker:point, next time you go, let's say, to the grocery store or what have you
Speaker:use cash and see how different that feels than you just swiping
Speaker:your card. And so with all of that,
Speaker:these companies realized that they could make money doing this.
Speaker:Now, don't get me wrong, there is a good side of using
Speaker:credit. So, of course, we all know you can't have credit until you have
Speaker:credit. And so, you know, if you ever
Speaker:wanted to get a house and you didn't have cash for a house or get
Speaker:a car, you don't have cash for a car, you're going to need credit.
Speaker:So building your credit history, also the convenience,
Speaker:sometimes, you know, just having a card on hand, the
Speaker:rewards. And also, I'll put a asterisk
Speaker:there with the rewards because that was also
Speaker:a marketing ploy for the companies to make more money.
Speaker:Now, if you use it responsibly, then cool, it'll work out
Speaker:for you. But if you don't, then that's just a way for them to
Speaker:get you to spend more on the credit card. Therefore they can charge
Speaker:more interest, therefore they make more money, and so on and so forth. So I
Speaker:just wanted to throw that out there, too. But also protection against
Speaker:fraud. So if you don't know, like if you use your debit card,
Speaker:for instance, it's a little harder to get your money back than if you use
Speaker:a credit card. When it comes to someone using your
Speaker:card without your permission. So if there's any fraud
Speaker:involved, it's easier to get your money back with a credit card than it
Speaker:is with a debit card. So also that's a good sign of credit
Speaker:as well. So I've also talked about on
Speaker:the podcast before back or way early. I think it was
Speaker:like one of my first episodes, maybe like four or five. Anyway,
Speaker:I talked about how I used credit to help get my son's
Speaker:braces when his dad had backed out at the last minute with his half of
Speaker:the money. And so there are situations where
Speaker:credit can come in handy, and you can use it responsibly
Speaker:to get things done that need to get done, but you
Speaker:also don't want to use it as a form of income. You
Speaker:want to use it as a tool to get what you need. So that's kind
Speaker:of how I look at credit, is using it as a tool
Speaker:to get whatever it is that I need and not as income.
Speaker:So when you think about it in that way, it makes you spend a
Speaker:little differently. Now, let's go into the
Speaker:stress that can come with using cards. So
Speaker:when you use credit cards, you know, at first it's all
Speaker:good. You know, you're like, oh, I just got these shoes, or, oh, I just
Speaker:went on this trip, or whatever the case may be. But
Speaker:later on, as you're starting to pay down that bill,
Speaker:you realize and you start getting stressed out or anxious
Speaker:about this mountain credit card debt. Because if you haven't
Speaker:noticed, with the rise in interest rates over the past year
Speaker:or so, it seems like these credit cards are going anywhere. And
Speaker:especially if you're paying just the minimum balance I've had, I have
Speaker:cards where they're actually increasing in balance even though I'm
Speaker:paying them. So it can feel like a never
Speaker:ending hamster wheel, you know, once you start going into
Speaker:that cycle. And also
Speaker:because, you know, I talked about how easy it is to spend on credit
Speaker:cards that can lead to financial strain, that
Speaker:can lead to financial stress, and then that can
Speaker:lead into our mental health and well being, being
Speaker:affected. So I know it's easy for me to talk about it, but let's look
Speaker:at the data. So a study published in the Journal of Family and
Speaker:Economic Issues found that individuals with higher levels of credit card
Speaker:debt reported higher levels of stress and lower well
Speaker:being. The numbers don't lie. They tell stories of sleepless
Speaker:nights and anxious days. Another study
Speaker:from the American Psychological association. So
Speaker:APA found that about 72%
Speaker:of Americans report feeling stressed about money, at least some
Speaker:of the time during the month. Now imagine the added
Speaker:strain when credit card debt enters the mix. It's like the shadow that
Speaker:follows you, affecting your mood, your relationships, and even your self
Speaker:esteem. I can tell you firsthand just
Speaker:working with different couples and also in my
Speaker:situations as well, that if your money's not right,
Speaker:your mood's not right. If your mood's not right, your relationships are not right.
Speaker:So that is why this is so important in
Speaker:getting things under control, because money can
Speaker:affect a lot of things, and relationships can be one of the
Speaker:casualties. Another compelling piece of evidence comes from
Speaker:a survey conducted by the National foundation for Credit Counseling. I've talked
Speaker:about them before, but they revealed that individuals
Speaker:with debt are more likely to report feelings of depression and
Speaker:anxiety. So these aren't just fleeting emotions for
Speaker:some, they're constant companions. And so
Speaker:that's why this is super important.
Speaker:Now, let's get into now, I know that sounded doom and
Speaker:gloom so far, but let's get into some
Speaker:practical tips to manage credit card use better and
Speaker:to have a better effect on your mental health. So first
Speaker:and foremost, creating and sticking to a budget. I know you all
Speaker:are tired of hearing me saying that, and I don't care, but it's so important
Speaker:to have that set up. And even if you
Speaker:don't stick to it, um, just having that
Speaker:awareness of how you're spending your money, how much you actually
Speaker:have to use so you don't have to use credit cards,
Speaker:is priceless. It's priceless in so
Speaker:many different ways. So if you have never
Speaker:created a budget before, I'll make sure I'll put a link in the show
Speaker:notes for a whole blog post I did on budgeting that
Speaker:includes a video walkthrough of the budget
Speaker:spreadsheet that you get for free. So that way you can
Speaker:do that. I'll also put a link in the show notes for
Speaker:my budget nirvana course, which goes more into
Speaker:depth about how to create your budget. All the mindset hacks
Speaker:and things that I use when it comes to budgeting, so on and so forth.
Speaker:So make sure you check that out for that information. Check out the show
Speaker:notes next. You want to keep track of your spending. So this goes hand in
Speaker:hand with budgeting, but it's so important to keep track of how you're
Speaker:spending and what you're spending it on. I have learned
Speaker:that once I go through the process of having my
Speaker:clients write out everything that they're spending or tracking for that first
Speaker:month or so, they're like, oh my gosh. Like, I didn't know I was spending
Speaker:XYZ on this, you know, because if you don't
Speaker:have that awareness, it's really hard to figure out where your
Speaker:money is going. And I like to use the analogy of a boat. Let's
Speaker:say you're rowing a boat and all of a sudden you see water
Speaker:starting to come into your boat. You don't know where the money is coming from
Speaker:because there's no huge visible holes. But what's
Speaker:happening is there's little small holes. And I
Speaker:equate that to small holes in your budget. When you don't keep track of your
Speaker:spending, you don't know what's going on. All those little small holes
Speaker:can sink your ship. And so you want to make sure that you're keeping
Speaker:track of what you're spending on and how you're spending your money.
Speaker:So that way you can plug up those holes.
Speaker:Also, if you do use credit cards, set limits on your
Speaker:credit card use. I know there's some people out there listening like, well, Tiffany, I
Speaker:love my rewards. Well, I love them for you as long as you use them
Speaker:responsibly. So set limits on how you use your credit cards.
Speaker:When you use your credit cards. When I was credit card debt free, I only
Speaker:use my credit, I literally put my cards in the
Speaker:freezer. So I put them in water, put them in the back of the freezer.
Speaker:I took them out my pocketbook so I won't be tempted because know
Speaker:thyself. And so I did not
Speaker:unfreeze them but once or twice a year just to make sure they don't
Speaker:administratively close them. And even when I did use them, it was only
Speaker:for gas or something small, just so they won't close the card.
Speaker:So that's another thing too. If you do have credit cards,
Speaker:make sure that, you know, if you do get on the wave of
Speaker:not using them, just use them periodically just so they
Speaker:won't close them. Because if they close them, that could also
Speaker:affect your credit score. Okay? So keep that in mind.
Speaker:But yeah, setting limits on your credit card use is super
Speaker:important. You know, you don't want to be maxed out and in
Speaker:a situation where you're maxed out and you can't afford to pay it
Speaker:back because then again, that will affect your
Speaker:mental health. Also, you want to make sure that you pay off your
Speaker:balances each month to avoid interest charges. So this is a
Speaker:misconception that a lot of people come to me about. They're thinking, oh,
Speaker:well, don't I have to keep a balance on it, you know, in order to
Speaker:improve my credit? No, you do not. When I was
Speaker:improving my credit, I would use it and pay it off almost
Speaker:immediately because I was terrified of credit, and
Speaker:that worked. So as long as you have them open,
Speaker:use them periodically, your credit card, your credit
Speaker:score will increase. The only,
Speaker:and honestly, I feel like these companies are the ones that
Speaker:made this up, that you need to carry
Speaker:a balance because they're the only ones that benefit. So when you carry a
Speaker:balance from month to month, you pay, pay interest on whatever that balance
Speaker:is. If you pay it off almost immediately, you don't have to pay any
Speaker:interest because no balance is being carried over. So
Speaker:keep that in mind as well. If you're in a situation where you
Speaker:already have credit card debt and you can't pay it off every month, at least
Speaker:try to get below 30% utilization, because then
Speaker:that would have a better effect on your credit score and then also
Speaker:your mental health, too, if you can keep your balances as low as
Speaker:possible. It is such a relief. It is
Speaker:such a relief. Also. I just want to encourage
Speaker:you all that you want to view credit cards as a
Speaker:tool so when they're used wisely, they can age you
Speaker:rather than harm your financial and mental health. And I know I've said that before,
Speaker:but I wanted to reiterate, credit cards are tools. They are
Speaker:not income. So you always want to use them wisely. If
Speaker:you want to get into the rewards game, use it wisely. If you want to
Speaker:use it for whatever it is, just use it wisely.
Speaker:Now, I will say that overcoming credit card debt is
Speaker:challenging, and it can feel extremely
Speaker:overwhelming. So I do want to let you
Speaker:know that it is okay to get help. If you need help
Speaker:with coming up with a plan to stay on track, to
Speaker:have someone say, oh, no, you know, we're not using a credit card for
Speaker:that, then get help. And I do
Speaker:offer one on one sessions with clients, so I'll make sure I have that
Speaker:link in the show notes as well where we can hop on a 15 minutes
Speaker:call for free just so I can see if I can help you or
Speaker:if I need to refer you to a credit counseling nonprofit or whatever
Speaker:the case may be. But I will say get help if
Speaker:you need help. Because sometimes, and this
Speaker:happens a lot with people that come to me, they just take the
Speaker:ostrich approach and stick their head in the sand. And they're
Speaker:like, well, if I ignore it, it never happened. And I'm here to tell you
Speaker:that is not the truth. So stop telling yourself that. And if you need
Speaker:help, get help, okay? There's nothing wrong with it. And
Speaker:there's so many people in all different income
Speaker:brackets that I help with their money. So there's no
Speaker:shame, no guilt, but we can work together to figure out a
Speaker:way to get out. Okay? So hopefully that was
Speaker:helpful. You know, in this episode, I just wanted to go over how credit
Speaker:cards started, what the mindset was with
Speaker:the people that started, and then also how it
Speaker:can negatively affect your mental health or positively if
Speaker:you use it the right way. So I want you to take a moment to
Speaker:just reflect on your relationship with credit cards and consider any
Speaker:changes that you might need to make for your financial health
Speaker:and well being and also your mental well being. Thank you so
Speaker:much for tuning in. You can find all the resources that I
Speaker:mentioned in this episode, plus more in the show notes, so make
Speaker:sure you check that out. Also, if you would like your question
Speaker:answered on the podcast, go to
Speaker:www.moneytalkwitht.com
Speaker:axtiffany. Also, make sure that you are
Speaker:liking subscribing, sharing and rating, and
Speaker:reviewing this podcast because it helps other people find
Speaker:us. And also, I would love to hear your experiences with
Speaker:credit cards and mental health via social media or email.
Speaker:Just let me know how you feel about either
Speaker:this episode or just credit cards in general. I'd love to
Speaker:hear. So thank you so much for listening and I hope you all have a
Speaker:wonderful rest of the day. Bye. Thank you for
Speaker:listening, joining and being a part of the Money Talk with TIFF podcast this
Speaker:week. You can check TiFF out every Thursday for a new Money talk
Speaker:podcast, but if you just can't wait until next week, you can listen to
Speaker:previous podcast
Speaker:episodes@moneytalkwitht.com or
Speaker:follow TiFF on all social media platforms at
Speaker:moneytalkwitht. Until next time, spend wise
Speaker:by spending less than you make a word to the money wise is
Speaker:always sufficient.
