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Mental health and Credit card debts.

Exploring links between credit card debt and mental health as COVID recession wears on.

Mental health and  Credit card debts.
Photo by Alexander Schimmeck on Unsplash

Credit card debt fell dramatically during the early months of COVID-19 due to falling US consumer spending, the Federal Reserve Bank of New York reported in August.

But as the country's economic lockdown started weighing on personal finances during the summer, there were sometimes 70% more people using credit cards to pay rent compared to last year, an analysis from the Federal Reserve Bank of Philadelphia shows.

In September, Money's survey of 2,200 US adults found that personal debt fell overall, but more Americans are stressed about credit card debt than any other type of debt.

On September 4, the Centers for Disease Control and Prevention imposed a moratorium on housing evictions. With the ban on evictions due to expire on December 31, financial difficulties are expected to occur in 2021. For those who are left behind, lose their permanent jobs and basic necessities, such as rent housing and tap water or are exposed to bank interest and fees on their credit cards to pay rent .

There are a number of studies showing how unpaid credit card debt, which rolls over from month to month, is linked to stress and other negative mental health outcomes.

Below is a highlight of five studies investigating how different types of credit influence consumer stress, anxiety, and depression in general.

There were mixed findings about how much stress-inducing credit card debt was compared to other debts, such as student loans. But overall, people with high credit card debt tend to experience higher levels of stress.

The big upshot of these findings is that unsecured debt, such as debt from credit cards or medical bills, is generally more likely to be associated with anxiety than secured debt, such as a mortgage - which is often not considered debt at all, but rather an investment.

One of the papers featured here offers that "because mortgage holders face their mortgage payments while living at home, people may be less likely to mentally label their mortgage as debt."

A secured loan requires collateral. In the case of a home mortgage, the house itself is collateral - if the mortgage holder fails to pay, the lender can claim back ownership of the home.

Unsecured loans do not require physical items as collateral. Credit cards do not require valuable physical objects as collateral if the consumer defaults.

The authors focus on the financial distress of US adults over the age of 62.They note previous research that found that certain debt or payroll loans, credit card debt, informal loans and other types - can result in a higher level of financial stress than, say, a mortgage. House . The authors used data collected as part of the Health and Retirement Study to explore the types of debt that cause financial distress in older Americans.

The Health and Retirement Study is a longitudinal panel study, meaning it asks the same questions of the same people over time.

The University of Michigan administered the study, which consisted of about 20,000 participants in the US who were over 50 years of age. The study included home owners and tenants and asked two questions about financial stress one about difficulty paying monthly bills and the other about whether participants were upset about ongoing finances.

The authors analyzed the results of several waves of surveys that Michigan researchers conducted from 2004 to 2016. Their final sample was roughly 10,000 people aged 62 or older, with an average age of 74.

About a quarter of the sample reported difficulty paying bills and 36% reported feeling annoyed with their financial situation. The household, on average, consists of two people with a net worth of about $ 300,000, an average home value of about $ 164,000, and an annual income of $ 48,000.

Most of the people in the sample were white; 12% were black and 7% were Hispanic. Almost all have health insurance. Other races and ethnicities were not reported.

The strongest predictor of financial stress? Credit card debt. In their sample, the authors attributed every $ 10,000 in credit card debt to a 65% higher chance that older Americans would report difficulty paying monthly bills and nearly doubled their likelihood of reporting ongoing financial stress.

"Our results suggest to researchers and policymakers the need to conceptualize retirement debt in a more different way," write the authors. "It is common in the health literature to measure net worth or total monthly debt divided by income as a single construct, which removes the difference in pressure that housing debt contributes to other forms of debt."

Quoted Consumer Debt and Satisfaction in Life by

Adam Eric Greenberg and Cassie Mogilner. Journal of Experimental Psychology: Applied, December 2020.

The author begins with written interviews with 98 people who have home mortgages, student loans and credit card debt. Participants have an annual income ranging from $ 15,000 to $ 150,000 and above, with an average income of approximately $ 86,500. The author asks participants to provide paragraphs describing their various debts. They found that some people did not view their mortgage as debt, but rather a vehicle to home ownership. Tuition loans, in contrast, are more likely to be viewed as debt.

To further explore these preliminary findings, the authors analyzed responses in seven other surveys totaling about 8,000 participants on how the type of debt affects consumers' satisfaction with their lives. Roughly half of the participants took part in a nationally representative survey of older adults - the median age was 56 - conducted from 2004 to 2006 by researchers at the University of Wisconsin-Madison.

The authors recruited the remaining participants in 2016 and 2017, mostly from Amazon's Mechanical Turk, the online crowdsourcing marketplace that many academics use to find survey participants. MTurk participants tended to be younger, with an average age of between 34 and 40 years across the five surveys. For most of the surveys, participants' median income was at or above the national average annual wage of about $ 53,000, although the authors controlled for income and age as part of their analysis.

They found student loans were most associated with participants who were dissatisfied with their lives. They found that home mortgages and credit card debt had little to do with life satisfaction.

Consistent with the initial study, they found that many participants did not view their mortgage as debt. One participant in the early study noted that he used to view mortgages and student loans as investments, but that student loans turned into "terrible debt" after they could not find a job in their degree.

"The results of the seven studies reveal that the type of debt is important, in part because not all debt is considered the same as 'debt'," the authors conclude. "In short, the more debt is mentally labeled as such, the more likely it is that holding onto that debt will make people less satisfied with their lives."

Debt and Psychological Pressure of Young American Adults

Qun Zhang and Hyungsoo Kim. Journal of Family and Economic Issues, December 2018.

The authors explored how student loans and credit card debt relate to psychological distress among Americans aged 18 to 28. Student loan debt constitutes the largest share of debt among younger Americans, who carry an average credit card balance of over $ 3,000, the authors note.

They analyzed surveys taken in 2005, 2007, 2009, 2011 and 2013 as part of the Transition into Adulthood Study, a nationwide longitudinal panel study conducted by researchers at the University of Michigan. The authors' sample included more than 7,000 responses from participants, two-thirds of them white and a quarter of them black, with a mean age of about 22 years and a median annual income of about $ 8,700. Other races and ethnicities were not reported.

Researchers measured financial stress by asking whether participants generally worried about not having enough money. Based on their analysis, the authors attributed every additional $ 1,000 in student loan debt to a 6% higher likelihood of financial worries, and every additional $ 1,000 in credit card debt with a 4% higher likelihood of financial worries.

"Credit card debt as a short-term liability has a stronger impact on stress than student loan debt," the authors concluded. "Action is needed from students and parents to prevent taking on unnecessary revolving debt."

Credit Card Blues: Middle Class and the Hidden Fees of Easy Credit

Randy Hodson, Rachel Dwyer and Lisa Neilson. The Sociological Quarterly, November 2016.

The authors examine unsecured debt, noting that it can provide financial support during life's transitions and challenges, while also adding to financial risk and stress on individuals and households.

The authors analyzed nearly 9,000 responses over a 13-year National Longitudinal Survey of Youth from the U.S. Bureau of Labor Statistics, which asked about levels of unsecured debt and, in 2000, began asking questions about mental health.

The survey follows a nationally representative cohort of participants who joined the survey in 1997 when they were juniors in high school. The author divides the respondents into three economic classes: lower class if they earn the bottom quarter, middle class for the middle three-quarters of income and upper class to the high-income quarter.

While "debt ownership is specifically associated with higher levels of stress as well as overall depression," richer borrowers are usually less affected psychologically by debt, "suggesting using short-term debt as a comfort strategy for those who are financially wealthy, write the authors.

They found that while lower and middle-class Americans despite having the lowest levels of debt in absolute terms, they are also most likely to experience emotional distress because of that debt, particularly at higher levels of debt, "consistent with the notion that debt can fill other sources of income leading to the to a significant balance for middle-class borrowers. ”Participants with lower incomes were found to be prone to anxiety, although not depression.

"What the poor need is not more credit, but perhaps better credit, and more basic income," write the authors. "Credit will not solve long-term poverty problems and insufficient resources and can actually exacerbate the problem due to the cost of credit in terms of paying interest, fees and fines."

Consumer Debt Stress, Changes in Household Debt and the Great Recession, Lucia Dunn and Ida Mirzaie. Economic Inquiries, April 2015.

The authors analyzed approximately 9,000 responses from US households who took part in the Monthly Consumer Finance survey from 2006 to 2012, the period that included the Great Recession. The survey is a nationally representative, randomized telephone survey from Ohio State University that includes several questions about individual debt levels and feelings of stress.

At the worst of the recession - roughly mid-2009 - debt-related stress was 50% higher than in 2006, the authors found. The average household was dependent on unsecured debt, or on secured debt during the Great Recession.

Based on their findings, the authors associated payroll loans, credit card debt and student loans with higher levels of stress. Consistent with the other findings presented here, mortgages are least associated with stress.

"Among the characteristics of different types of debt, one important feature that can be identified that differentiates the types of debt associated with higher stress from those with lower stress is whether the debt is guaranteed or not."


A project of Harvard Kennedy School’s Shorenstein Center and the Carnegie-Knight Initiative, Journalist’s Resource curates, summarizes and contextualizes high-quality research on newsy public policy topics. We are supported by generous grants from the Carnegie Corporation of New York, the Robert Wood Johnson Foundation, the Bill & Melinda Gates Foundation, and The National Institute for Health Care Management (NIHCM) Foundation.

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

mental health
Viona Aminda
Viona Aminda
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