Ask a consumer about their credit card debt and, more likely than not, you’ll wind up talking to the proverbial stone wall.
That’s not exactly a shocker, as Americans and personal finances have historically been a taboo topic. Yet with the inflation siren on full blast and recessionary clouds rolling in, U.S credit card holders are not only avoiding talking about card debt, they’re afraid to even look.
Case in point.
According to a new study by Upgraded Points that aimed to look “behind-the-scenes” at consumer credit card behaviors, 20% of respondents are “afraid to check their credit card statements.” More women said they are afraid to check their credit card statements than men, by almost 10%.
Here are more study takeaways that point to the high anxiety cardholders feel about their plastic debt.
· Over 1 in 5 (22%) would rather someone read through their text messages than their credit history.
· Almost 1 in 4 (24%) would rather go to the dentist than share their credit history with their partner.
· 82% of baby boomers would rather have their credit card debt disappear rather than their student loan debt, compared to 64% of Gen Zers who would rather have their student loan debt disappear than their credit card debt.
Fear Factors
Why are so many credit card holders reluctant to face their card debt head-on? Remorse about overspending leads that list.
“Many U.S. credit card owners are afraid to look at their credit card statements because they know they have overextended themselves when using credit,” said Annette Harris, founder at Harris Financial Coaching, in Jacksonville, Fla. “When card owners receive their statement they tend to ignore the fact that they need to pay the credit card to cope with the anxiety that comes with dealing with spending issues. However, the bill is still due, and this escalates their money problems.”
That’s not a good habit to get into, as ignoring credit card bills leads to much bigger problems.
“For instance, one big issue with avoiding a credit card bill is that it can affect their ability to obtain a home loan in the future,” Harris said. “When mortgage lenders view a home applicant's past credit, they’ll know the individual is not paying their credit card bills. Among other things, this can eliminate or delay their dream of homeownership.”
That’s just the tip of the iceberg. For instance, one 30-day late payment can impact a consumer’s credit score by as much as 50 points.
“Besides missing out on a new home, ignoring a credit card statement and missing a payment can hurt your chances of getting a new job, as many companies now do credit checks as part of the background check process,” said Matthew Grishman, a wealth advisor at Gebhardt Group, Inc., in Roseville, Cal. “The financial implications for ignoring your credit card statements are massive.”
Going to a Dark Place
Even experienced financial professionals can relate to the fear and anguish that comes with a high credit card bill.
“For many of my 27 years in this industry, I had a train wreck of a relationship with money,” Grishman said “A byproduct of this was eventually ignoring my credit card statements, even when I had the money to pay the bill.”
The good news is that as the Upgraded Points article shows, over-spenders are not alone when expressing fear about credit card debt. “In that regard, many Americans are on this boat together,” Grishman said.
There is no quick fix to changing the “fear of debt” equation, but transparency can help.
“What helped me begin to change was by talking about it openly with other people and not keeping my secret inside of me,” Grishman said. “We are only as sick as our secrets. So as I shared my avoidance of credit card bills, it began to take the fear away. Ultimately, talking about the issue took the power away that the fear held over me.”
Get 'Hands On'
Some practical “hands-on” measures can also take credit card debt fear off the table, if gradually so.
“Sometimes it's easier to bury your head in the sand, but it's critical to come up with a good plan for paying down your credit card debt,” said Ted Rossman, senior industry analyst at Bankrate.com. “My top tip is to sign up for a 0% balance transfer card, which can pause the interest clock for up to 21 months.”
Other good strategies might include using a low-rate personal loan as a form of debt consolidation or engaging with a reputable nonprofit credit counseling agency.
“Personal loan rates go as low as about 6% over five years if you have good credit, and debt management plans offered by reputable credit counselors often have similar terms and are more widely available,” Rossman said.
Personal finance fundamentals matter, too.
“Turbocharge your debt payoff strategy by looking for ways to increase your income and/or lower your expenses,” Rossman added. “Ideas might include taking on a side hustle, selling stuff you don't need or canceling little-used subscription services, and dining out less frequently."
