Is the human brain partly to blame for credit card debt?

Faced with overwhelming levels of debt, many Tennessee residents are unsure how things got so out of control. It is not uncommon for a borrower to sit down to review the full scope of his or her credit card debt and have little understanding of how that money was spent, much less have much to show for it. A recent article takes a look at how the human brain processes financial information, and suggests that humans may simply lack the ability to fully comprehend the concept of credit.

Consider the manner in which our ancestors obtained goods and services. They didn’t pull out a credit card; they traded their own goods and services. Very often, those trades involved the actual physical transfer of property from one individual to another. That was a very tactile experience, and one that left no mystery as to what was lost or gained.

Today, however, we purchase many goods and services on credit, without any physical transfer of property or wealth. That creates a large degree of removal from the purchase and the depletion of wealth. Our brains may not have caught up to our new ways, which might be why we struggle to keep an accurate tally of what we have spent.

One way to combat that mental hiccup is by using cash to pay for everyday purchases, rather than relying on credit or debit cards. By allotting a weekly budget and carrying that budget around in bills and coins, every purchase takes on a tactile element. That can make it far easier to see when the reserves are getting low, and to make choices accordingly. For those in Tennessee who are struggling with high credit card debt, changing the way that money is handled can make a world of difference in managing debt and regaining financial stability.

Source: USA TODAY, “Stuck in debt? Don’t feel bad. Your brain can’t process the concept of credit.“, Jeff Stibel, July 14, 2017