The Average Woman Has More Credit Card Debt Than You Think -- Yahoo Finance

Press Release from Financial Wellness Strategies

YaËl Bizouati-Kennedy Wed, May 8, 2024

Women face specific financial challenges, such as pay disparity as well as being the primary family caregivers in many situations.

These challenges will not only take a chunk out of your savings, but also create a snowball effect in terms of accumulating credit card debt. Indeed, a new GOBankingRates survey found that a whopping 60% of women carry credit card debt, ranging from a few hundreds of dollars to several thousands.

And the survey found the issue affects women across all generations. For instance, 21% of women aged 65 and over have more than $7,500 in credit card debt, while this decreases to 12% for women in the 55-to-64 age bracket.

Meanwhile, this further decreases — but is still notable — for 10.5% for those in the 45-to-54 age bracket; 9.42% for the 35-to-44 age group; 6.7% for the 25-to-34 and 6.6% for the 18-to 24 age group.

Keep reading for a deeper dive into the reasons behind these credit card balances.

What Are the Drivers?

While several experts argue that many drivers of credit card debt are tied to gender neutral challenges, such as a lack of understanding how credit cards and debt work, there are some factors that are especially relevant to women.

First of all, the gender pay gap means that in general women simply earn less money.

Women also tend to bear the costs of caregiving of both children and older relatives like parents, said Bobbi Rebell, a certified financial planner, founder of Financial Wellness Strategies and author of "Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart."

In turn, she said that this can not only slow down, but also disrupt and derail careers, leading to lower earnings.

"Less money coming in makes it that much harder to make ends meet, and so credit card debt can become a way to get by even if they know how expensive that choice can be," she said, adding that women also can have higher costs than men.

"For example many women face higher healthcare costs, and as previously mentioned, higher costs related to caregiving whether it is children or the elderly," she noted.

And of course, macro-economic factors, such as persistent inflation, has made covering essential expenses like these harder and harder, which according to Tanya Peterson, the consumer finance expert and vice president of brand at Achieve, can make it necessary for some to turn to credit cards.

How Much Credit Card Debt Do Women Carry?

According to the GOBankingRates survey, 15.5% of women have under $500 in debt and 14% have between $501 and $2,000.

Meanwhile, 7.8% of women have between $2,001 and $3,500; 5.3% have between $3,501 and $5,000; 4/9% have between $5,001 and $7,500.

Finally, a whopping 12.3% have more than $7,500 in credit card debt.

What Can Women Do To Avoid Credit Card Debt?

Unfortunately, there is no magic solution, said Rebell, but the best place to start is with information.

"By understanding how debt works, including the expensive consequences, [women] can set themselves up to make the best choices based on their circumstances," Rebell added.

Yet, experts noted that there are steps women can take to alleviate their credit card debt load and try to not carry any in the long-term.

Budget

As Peterson noted, women can take the reins, or work together with their partners, to create a realistic household spending plan detailing all income and expenses.

And once you have a clear picture of what is going on, you can make informed decisions about where you can cut back, and where you might need to find ways to try to generate more income if you can, according to Rebell.

"If you can't pay your balance immediately, make sure you are at least avoiding late fees. Ask the credit card company for a lower rate — it costs nothing to ask!" she added.

Save

While this can be difficult for many women, not having a plan for a potential layoff and little to no emergency savings is not a good financial foundation, said Peterson.

"Women must incorporate savings into the budget as an expense item — so that, in effect, they're paying themselves," she continued. "Keeping savings in a regular checking account with a mental note that the money is for unexpected expenses is not the way to go; it's too tempting to spend," she said.

Don't Touch the Plastic

Another tip from Peterson: cash out your spending money in cold, hard bills, and don't touch the plastic for discretionary expenses such as clothing, entertainment, coffee or restaurant expenses.

She added that women can also freeze their credit card accounts to prevent overspending.

Consider a Debit Card

In addition, while most adults need one credit card, using a debit card instead enables you to not have balances accumulate.

To manage personal business, most adults need to own one credit card, but if you are tempted to use the credit card too often, try using a debit card instead so that balance doesn't continue growing.

Pay Off the Debt

Determine if you can pay down your credit card balance on your own with the help of a good budget. Consider using the avalanche or snowball debt repayment strategies.

"Understand that it will not be easy and will take commitment and likely a good deal of belt-tightening," said Peterson.

Other Options

If you cannot pay off the debt on your own, you can also look into personal loans.

If you can qualify for one at a rate that's significantly lower than the rates on your credit cards, you can pay off your higher-interest debt with the loan funds. Then, Peterson said, you just have to make the personal loan payments.

Peterson also recommends using a balance transfer card — credit cards, with a low or zero interest, which are usually available only to those with good credit.

"The low rate will only be in effect for a limited time, often six-12 months, but it can be longer," said Peterson.

"You would transfer your high-interest debt to this new card, then pay off the debt in full at the [lower] rate," she added, noting that you must be able to pay off the balance in full before that rate expires or the savings won't be worth it.

"In addition, fees can be high, so make sure that [the total cost of fees] won't be more than the savings you'll reap from doing the transfer," she said.

Finally, debt settlement can reduce the principal amount of debt that you owe.

"While not a panacea, it can be an option for someone having a hard time making even minimum payments, often as a result of some type of financial hardship," she added.