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 [email protected] 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.