The mental toll of being cash-poor and credit-rich is getting worse for middle-class Americans

We’re halfway through 2024 and Americans are still living paycheck to paycheck with limited savings or an inability to endure a cash emergency. As a result, millions of Americans borrow money to pay for planned and unplanned expenses. From student loans to sky-high rent, rising interest rates, and increasing prices at grocery stores, it’s daunting to be in a situation where you’re constantly worrying about money and your financial well-being.



Being in this heightened state can lead to sleep problems, issues with blood pressure, and just an overall sense of anxiousness. According to a survey more than half of Americans say that money negatively impacts their mental health. Economic factors are playing a large part in overall mental deterioration, and despite the current administration’s efforts, there still is very little relief from financial strain. 



When an emergency occurs, many Americans turn to traditional banking and financial solutions like credit cards to borrow money that don’t always have their best interest in mind. Many lending products come with hidden “junk fees” and an annual percentage rate (APR) that is misleading for consumers and doesn’t truly reveal the costs to those in need. Most individuals and households carry a credit card balance month to month and are unable to make payments. Credit card interest margins rise daily, and consumers are cash-poor, but credit-rich.



Earlier this year, President Biden took another initiative against junk fees —specifically credit cards. Under the new rule , most credit card late fees will be capped at $8. The Administration estimates credit card companies are generating five times more on late fees than it costs to recoup the late payment. Biden said, “They’re padding their profit margins and charging hard-working Americans. This action will collectively save families $10 billion in credit card late fees every year.” On average, credit card companies were charging $32, making it more difficult and stressful for hardworking Americans to save and not be cash-strapped. It goes way beyond late fees, however, which is why it’s surprising that the entire issue is not being addressed and will not solve the overlying problem. 



Even with Biden’s new plan on credit card fees and forgiving millions of borrowers’ student loan debt isn’t enough and won’t protect consumers from all the costs they endure when they swipe.



The data on all the junk fees consumers incur when borrowing money is staggering. A recent 2023 Cash Poor report showed that Americans pay over $25 billion dollars a year in hidden fees to financial platforms. These are everyday, middle-class people who earn over six figures, have college degrees, and still feel the financial impact. It’s worth noting that unplanned expenses cost the average American family living paycheck to paycheck nearly $2,000 a year. These are unavoidable and financial companies shouldn’t be allowed to take advantage of consumers in need. But they do. 



The data found that subprime credit cards are the worst for borrowers regarding additional junk fees. Subprime credit cards are classified as credit cards intended for those with lower income. These credit cards cost consumers $11.5 billion in fees. Fees include APR, subscription fees, late fees, fast payment processing fees, application fees, monthly maintenance fees, new card fees, and ATM fees.



Payday loans are the second most costly option, totaling approximately $6 billion in additional fees. Fintech solutions, such as earned wage access and peer-to-peer lending, offer the cheapest solution, amounting to $1.3 in annual fees. The Cash Poor report found that 30% of Americans living paycheck to paycheck and dealing with mounting fees said that they suffer from poor mental health, such as depression or anxiety. 



If you are looking to reduce anxiety about money woes here are some practices that you should apply immediately: 




Exercise : No matter what take time out for yourself. It’s been proven that even a little regular exercise can help ease stress and boost your mood and energy. Breathe and try not to create an added burden on yourself. This is also a great way to spend your time and distract yourself from spending money you don’t have. 



Spend time with loved ones : Money problems can affect your social life and relationships. You might feel lonely or isolated, or that you can’t afford to do the things you want to do. These individuals you trust can help you spot warning signs of overspending if you struggle with your mental health.



Managing what you can control . Don’t save your credit card details on websites. Be sure to delete apps where you usually overspend or apps that encourage you to spend. Find ways to delay purchasing anything. 



Plan accordingly. You can start by knowing your income and understanding exactly how much money you expect to get and when you expect to get it. This can help you budget. You should also know your regular expenses. If you don’t know where to begin, look at the previous month and think of all the expenses that are a fixed cost such as rent or insurance. You can then use this information to create a spending plan. 




It’s an employer’s responsibility to provide financial wellness benefits that can help employees feel confident and prepared to address unforeseen expenses. Regardless of an employee’s compensation, the lack of financial knowledge or even a basic understanding of money matters will only result in a team’s lack of productivity and engagement.



Common topics to discuss openly with employees are household budgeting, managing credit and debt, having a savings plan, investing and planning for retirement, taxes, and insurance. Having this in place will lead to a long-term positive impact on contributions at work.