By Loretta Kilday
The landscape of personal finance reveals a significant gender gap, particularly in credit card debt. This gap, often misconceived as a byproduct of irresponsible spending, is rooted in a complex interplay of societal and economic factors and the wage gap. In the United States, credit card usage is widespread. However, many mismatches exist between men and women in dealing with credit card debt.
Gender Gap in Payment Confidence
A recent study highlights a surprising difference: 26% of female cardholders are still determined to meet all their payment obligations in a given month, nearly double the rate observed among their male counterparts (14%).
Wage gap and the capacity to repay debt
Wage gap The difference between men and women is made worse by the fact that women only make 80% of what men do. 31% of women with credit cards have paid their balance in full just once or less in the last six months, compared to only 20% of men who do. This is a worrying trend.
Cultural biases and a lack of financial education
In the U.S., women have an average of $5,700 in credit card debt, which is a little more than men’s $5,640. Even though the economy is doing well, these numbers point to greater problems, such as cultural biases and a lack of financial education tailored to women.
The role of media in perpetuating these distinctions and the marketing of high-interest credit cards further compound the problem. Alarmingly, only 20% of American credit card users consistently make timely payments each month. Additionally, both genders grapple with other forms of debt, such as student loans and household obligations, further complicating their financial landscapes.
This article delves into the underlying reasons for this gender gap in financial dealings. Women often struggle with more credit card debt than their male counterparts.
Income Inequality:
One significant factor contributing to the gender differences in credit card debt is income inequality. Women, on average, earn less than men across various industries. The wage gap and overall consumer debt stress directly affect their capacity to cover essential expenses, leading many women to use credit cards to bridge the financial gap.
Career Interruptions:
Women frequently experience career interruptions due to family-related responsibilities such as childbirth and childcare. These interruptions can result in a temporary reduction in income, prompting women to resort to cards to maintain their standard of living during these periods.
Longer Lifespan and Healthcare Costs:
Women generally live longer than men, which means they may face higher healthcare costs, especially later. The financial strain of medical expenses can drive women to accumulate credit card or student loan debt to manage unforeseen healthcare bills.
Limited Access to Financial Education:
Studies show that women often have less access to financial education than men. No financial knowledge can lead to poor financial decision-making, including using credit cards. Bridging the financial education gap is crucial in empowering women to make informed economic choices.
Coping Mechanism for Stress:
Research suggests that women are more likely to use shopping and spending as a coping mechanism for stress. Emotional spending can contribute significantly to credit card debt and student loan debt, as individuals may resort to retail therapy to alleviate stress or emotional distress.
Single Parenthood:
The rise in single-parent households, predominantly led by women, has financial implications. Balancing the responsibilities of parenthood without the support of a partner can strain finances, making credit cards a necessary resource for meeting daily expenses.
Societal Pressures and Consumerism:
Societal expectations and the pressure to conform to specific living standards can drive women to use credit cards excessively. The influence of advertising and societal norms can create a culture of consumerism, encouraging women to accumulate credit card debt to meet perceived expectations.
Lack of Emergency Funds:
Women sometimes face challenges in building emergency funds due to various financial constraints. Without a financial safety net, women may resort to credit cards when unexpected expenses arise, contributing to higher student debt.
Does gender influence lender decisions?
No lender judge you by your gender or gender identity. Lenders cannot discriminate regarding loans per the Equal Credit Opportunity Act. Before the Act of 1974, lenders required a male co-signer for women. Before 1974, women faced difficulties establishing credit, purchasing homes, or obtaining business loans without a male counterpart. Even though this discrimination is against the law, people still hold onto their biased beliefs.
What should you do if you think your gender is hurting your finances?
If you think your gender or gender identity is being monetarily slandered, acquire as much proof as possible. If your state allows one-person recordings, take notes and record talks. Keep communications in email format for better tracking. Once you have all the evidence, make a complaint with the appropriate body.
How men and women can repay payday loans, including other unsecured debt
Repaying payday loans and other unsecured debts requires a strategic approach for both. Here are some general tips that can apply to both genders:
Create a Budget:
- Start by outlining your monthly income and expenses.
- Categorize your spending. It helps in identifying areas where you can cut back.
Prioritize Repayments:
- Identify high-interest debts like payday loans and prioritize their repayment—for example, private student debt or payday loan debt.
- Consider the snowball or avalanche method to tackle multiple debts like private student debt, payday loan debt, or credit card debt.
Negotiate with Lenders:
- Reach out to your lenders to discuss your situation.
- Negotiate for lower interest rates or extended payment terms.
Consolidation Loans:
- Explore the option of payday loan consolidation with lower interest rates.
- This can combine consumer debt into a single, more manageable payment.
Seek Professional Advice:
- Consult with a credit counselor for personalized advice.
- It helps create a debt management plan.
Increase Income:
- Try to boost your income, such as a part-time job or freelancing.
- Allocate the extra payment towards debt repayment.
Emergency Fund:
- Establish an emergency fund to avoid relying on payday loans in the future.
- Having savings can prevent further high-interest private student debt accumulation during unexpected expenses.
Cut Unnecessary Expenses:
- Evaluate your lifestyle and identify non-essential expenses.
- Redirect those funds towards debt repayment.
Financial Education:
- Improve your financial literacy. To make informed decisions.
- Understand the terms and conditions of loans. To avoid falling into debt traps.
Stay Committed:
- Repaying debt takes time and discipline.
- Stay committed to your repayment plan and avoid accumulating new debts.
Tackling Debt Is Possible
Effective strategies for managing debt vary with individual circumstances. It’s wise to seek advice from financial professionals or credit counselors for personalized solutions. Understanding and addressing the impact of debt on well-being is essential for maintaining health.
Tackling the gender disparity in credit card debt requires a holistic approach. This includes addressing income inequality, enhancing financial literacy for women, and promoting work-life balance through supportive workplace policies.
Recognizing the complex factors contributing to higher debt burdens among women is crucial for advancing financial equality and empowerment. If debt affects your health, analyzing its underlying causes and consulting financial and family counselors is important for managing both debt and health effectively.
Attorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum.
