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Is the human brain to blame for credit card debt?

For many people in Washington who find themselves in serious debt, the manner in which they got to that point is not always clear. Even well-educated, competent and otherwise successful individuals can become mired in credit card debt, often with little understanding of how those balances grew so high, so quickly. According to a recent article on the psychology of debt, it may be that the human brain is simply unable to fully comprehend the concept of credit, which can lead to trouble.

Think about the idea of debt. Our ancestors did not operate on a system of credit; they simply traded goods for what they needed to survive. That was an innately tactile transaction -- there were literally items of value that passed from hand to hand. Today, we simply swipe a card to get what we want or need, and that process does not have nearly the same impact on our brains. The end result can be a detachment from the realities of our spending, and an inability to lose the proper perspective on financial transactions.

One way to address this problem is by using cash for the vast majority of purchases. By withdrawing a weekly budget and then paying for everything out of that literal or figurative purse, we can actually see our funds depleting, and it becomes harder to ignore how much has been spent, and how little remains. This is not to say that credit cards offer no benefits. With proper management, they are a great way to fund an emergency expense, gain reward points or build a strong credit score in preparation to purchase a car or home.

For those in Washington who are facing serious credit card debt, the impact that the human brain has on spending and saving could make it easier to understand how things got so out of hand. Once debt has been eliminated through bankruptcy or debt repayment efforts, it will be possible to start anew. Understanding the importance of using cash for most purchases and reserving credit cards for use only in certain circumstances can go a long way toward avoiding future debt issues.  

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

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