The stress of carrying card debt as an adult is linked to poor health, including joint pain or stiffness that interferes with daily activities, a recent University of Missouri study found. Beyond worries about paying off debt, one reason for poor health may be that people with high debt have little money to pay for resources that protect their health, the study found.
The findings come at a time of heightened financial insecurity across the world due to the pandemic, although the study noted that the level of unsecured debt, such as credit cards, payday loans or bills medical, has grown faster than incomes over the past several decades.
The new research used data from the US Department of Labor to analyze the financial health of nearly 7,900 baby boomers over more than a decade, aged 28 to 40, as well as their physical health at age 50. with unsecured debt were 76% more likely to have pain that interfered with their daily life than people without unsecured debt.
People in debt over time have reported deterioration in their physical health late in life, said Adrianne Frech, a medical sociologist and associate professor in the university’s School of Health Professions, who is the lead author of the study. study.
And the effects persisted even though the debt had been paid off, she said. People who had paid off their debt over time were still 50% more likely to have pain that interfered with their regular activities.
The study builds on previous research which found that unsecured debt is heavier than other types of debt because it has higher interest rates and is often borrowed in times of desperation.
“Unsecured debt is stressful to pay off,” Frech said.
Poor health and high debt can fuel a cycle that’s hard to break, she said. People go into debt and stress affects their health, which in turn can limit their ability to work and pay off high interest debt.
Just telling people to manage their money better isn’t enough, Frech said.
“We need to address the systemic inequalities that create these desperate circumstances in the first place,” she said.
The study period predates the 2008 financial crisis and the pandemic-induced economic slowdown. This did not include student debt, which many borrowers struggle to pay off until their 30s and 40s.
Some indicators suggest that household debt is becoming a concern for some consumers. The share of people judging their debt-to-income ratio “very unhealthy” doubled in the third quarter, from 8% to 16%, according to the American Consumer Credit Counseling Financial Health Index.
And an online survey from Bankrate.com found that more than a third of people who had card debt before March 2020 saw their balances increase during the pandemic.
Here are some questions and answers about managing credit card debt:
What’s the best way to pay off credit card balances?
Since credit cards typically charge double-digit interest rates, most financial advisors agree that you’ll save the most money if you focus on paying off the card with the rate first. highest interest.
This is how it works:
Make the minimum payment on all of your cards to avoid late fees, but put any extra money you have on the highest balance. When this balance is paid, move on to the next card and so on.
But some people may be more motivated by paying off the card with the smaller balance regardless of its interest rate. The mechanics of this approach, sometimes referred to as the “snowball” method, are the same: pay the minimum on all cards, but put extra money on the smaller balance until it disappears, then spend. to the next card.
“I love the snowball because you have instant success,” said Melinda Opperman, president of Credit.org, a nonprofit financial advisory agency in Riverside, Calif.
If you are feeling overwhelmed and falling behind on your payments, you may want to consider seeking help from a nonprofit credit counseling agency.
How to avoid overspending while on vacation?
Shoppers expect to spend a lot this holiday season on gifts, food, decorations, and other holiday-related purchases.
But Opperman said many customers told him they were still paying last year’s credit card bills. She suggests focusing on spending time with loved ones over the holiday season rather than buying expensive gifts. She said she asked customers, “Do you remember the gift your sister or brother gave you last year? Often, she says, they don’t remember. But they remember playing a fun game or sharing a meal. “It’s more about memories of time spent with family and friends.
Jacobs recommends that you only take out the credit card for items that you know you can pay off within a month.
“If you don’t have the money up front for it, you shouldn’t buy it,” he said.
He also suggested starting to build an emergency fund, if possible, with three to six months of living expenses.
This way, you will be less likely to depend on high interest card debt if you have an unexpected bill.
When it comes to vacations, a basic step to avoiding overspending is to make a plan before you buy how much you’re going to spend, said Abigail Sussman, associate professor of marketing at the University of Booth School of Business. Chicago, which studies how consumers make decisions.
“Setting a low spending goal can help,” she said.
She also noted that many digital shopping options, like registering your credit card on a retailer’s website, make it so easy to purchase, “it just feels like it’s free. “. So you can pull your card off the site, she said, forcing you to take the extra step of entering your credit card information every time you make a purchase: “make it harder to spend. . ”
Should I put medical bills on my credit card?
It’s best to speak with your health care provider first, counselors say. Many hospitals offer low interest or no interest payment options for short-interest patients, and some will take less than the full bill if you offer to make a partial payment immediately.
Putting the bill on your credit card means you’ll pay double-digit interest charges. And if you fall behind in payments and the debt goes to a collection agency, it will likely hurt your credit score.