However, having a credit card can backfire. Young adults taken in by the illusion of a free credit line might find themselves plunging deeper into debt as they tackle student loans and growing professional lives. Haunted by financial choices made years ago, the once shiny freedom is now a plastic nightmare.
According to the Wall Street Journal approximately 70 percent of undergraduate students in the United States take out some sort of loan to pay for their education, averaging in at about $33,000 per student. The average American home utilizing one credit card has a little less than $16,000 in debt at any given time, stated CNN.
Financial blogger Jason Hull writes about the way in which the human brain is actually wired to react differently to the ways we pay for goods and services. Brain scans show that pain is registered on a significant level when we pay for things in cash versus when we swipe a credit card, where almost no pain is registered whatsoever. The very act of handing over cash makes us experience a sense of loss — our wallets get smaller and we know down to the cent how much we have left. Using a credit card is different; it’s impersonal and we can swipe as many times as we need to in order to get what we want, which makes our brains feel good.
Whether we are purchasing our morning coffee, signing up for a 36-month lease on a new car or taking on a significant amount of debt to pay for college; sensitive bits of reasoning and behaviors are at play making our decisions, sensible or otherwise, seem rational. Part of this rationalization is analyzing how much debt we can incur compared to the result we are seeking like a new car or an educational degree. Plus, the personal and professional benefits that comes out of taking on debt.
Cognitive dissonance is the mental discomfort that occurs when we think two opposite things or hold two opposing beliefs. For instance, when we are in debt but don’t think of ourselves as people who owe others, we seek to minimize this disconnect, which in this case involves paying off our debt slowly but surely.A New Normal
Socially speaking, being in debt has become so normal that it is nearly impossible to find someone who doesn’t have a credit card or significant debt in their lives. The psychological stress of debt is well documented; physiological reactions to getting a bill payment in the mail or checking your loan to see how much interest has accrued can cause sweating, headaches, increased heart rate and feelings of anxiety. When you are swiping that card now or have your mouse hovering over the ‘submit’ button on loans for school, remember that this debt will be in your life for years to come.
If you’re in debt now or are going to be in the future, keep in mind the ways your brain will minimize the real impacts of debt. No matter where you’re at in life, finding a stable financial advisor to monitor your debt intake and credit card spending will keep you from cringing whenever you open your mailbox five or ten years down the road. Remember that some debt is worth taking on for a car, an education or a new home — but not all debt is beneficial to your life, and the financial habits you form now will stay with you.