Here’s an interesting read as we close out October. The New York Times reports on a research study from The University of Missouri in an article titled “Credit Card Debt is Bad for More than Just Your Finances.” The essence of the research centers around “A new study that worries about repaying debt may lead to poor health in later life.” Says the Times:
The stress of carrying card debt through adulthood is linked to poor health, including joint pain or stiffness that interferes with daily activities, a recent study from the University of Missouri found. Beyond the worries about repaying debt, one reason for poor health may be that people with high debt have little money left to pay for resources that protect their health, the study said.
The findings come at a time of increased financial insecurity for many Americans due to the pandemic, though the study noted that the level of unsecured debt, like credit cards, payday loans, or medical bills, has been rising more quickly than income over the past several decades.
In short:
It found that people who carried consistently high levels of unsecured debt were 76 percent more likely to have pain that interfered with their daily life than people with no unsecured debt.
People who carried debt over time reported worse physical health late in life, said Adrianne Frech, a medical sociologist and associate professor at the university’s School of Health Professions who is the study’s lead author.
And the effects lingered even if the debt had been repaid, she said. People who had paid down their debt over time were still 50 percent more likely to have pain that impeded regular activities.
According to the University of Missouri website:
Adrianne Frech, a medical sociologist, and associate professor at the MU School of Health Professions, analyzed data from the U.S. Bureau of Labor Statistics to example the financial health of nearly 8,000 “Baby Boomers” from age 28 to age 40, as well as their physical health.
Now, I don’t challenge the findings, and they are intuitive, but if the study was done for a business environment, you might want to know about the other variations on the data. For instance, is it low-wage workers feeling the stress, and what else is going on in their lives? Do they lack healthy 401(k) accounts? Do they have physical labor jobs that worked when they were thirty but might be too much for their old bones at 50?
And most of all, are these transactors – those who pay their bills on time – or revolvers – those that carry forward debt, the 43% or so of those who pay credit card interest? From personal experience, I get stressed out when I have an obligation but feel good when the commitment is paid off.
The University study is interesting, though it might also consider who fits into the group. Other factors play a role. The story reminded me of one Payments Journal covered in early 2021. The story talked about a recent MIT study about the feel-good aura of using a credit card.
A study by the Massachusetts Institute of Technology (MIT) shows that credit card spending triggers the same chemical reaction in the brain as addictive drugs such as cocaine and amphetamines.
But different cards can spark different desires, the study showed. Cards used in restaurants and on holidays create a greater appetite for spending than cards used to buy fuel, for example.
The takeaway, or at least mine, is that I feel good when I use credit cards. You do not have to touch money. You are protected at the point of sale. It can be a profitable game if you rotate cards for rewards. For example, my Amex Blue Preferred is the card of choice for groceries because it pays back 6%. But In Q4 2021, remember to use your Chase Freedom at PayPal because of the 5% back. Or, in December, use your Discover it card at Target to get 5% back. And if it is for gasoline, Citi Premier’s 3x multiplier is excellent, particularly as the national average for regular-grade gas is now $3.39. Or try Chase’s “adaptive accelerator”, and is there anyone in the world who does not want a trip to Disney on Chase?
But one thing is for sure. It does feel good to use a credit card and even better to repay.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
