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Women turn to credit in a pinch; men splurge

Kelly Dilworth

In times of trouble, women are more likely than men to view credit cards as a financial lifeline. Men, on the other hand, are likelier to see high-interest cards as a tool for splurging on luxuries they can’t afford to pay for with cash.

Those are the findings of a new study in the Journal of Consumer Affairs, and having gone through financial insecurity more than once myself, that makes sense to me.

While I can’t speak to how men see credit cards when they’re feeling financially uncertain, I can attest that I’ve certainly viewed cards as more safety net than friend.

When my finances are tight and my income is unreliable, I tend to look at cards as just another source of emergency funds – only to be used when there are no better options.

Women turn to plastic in a financial pinch

According to the study, I’m not alone in this sentiment. When facing a financial crisis, such as unemployment, women are significantly more likely to adopt the risky strategy of using high-interest credit to help make up for their drop in income, the study authors found.

Women, though, are less likely to use their cards to fund nonessential purchases.

The study’s findings run counter to popular stereotypes that cast women as credit card-wielding spendthrifts who aren’t afraid to use plastic to finance expensive shoes and other luxuries. The findings also challenge the conventional wisdom that women are more risk-averse than men.

“We found that gender absolutely influences attitudes about debt,” study co-author Mary Eschelbach Hansen said in a news release.

“When women observe others facing financial troubles or unemployment, or when women themselves have these experiences, they come to view debt as a tool to help smooth consumption. And, in general, they are less tempted than men to use debt to buy luxuries.”

To arrive at their findings, researchers combed the Federal Reserve’s triennial Survey of Consumer Finances for information about how men and women view credit in a crisis.

Women, men and credit cards

The researchers theorize that women may be more willing than men to use credit to finance everyday expenses because, historically, they tend to have less money available. As a result, they may not feel as if they have much choice.

Women also may be more reluctant to use plastic to pay for luxuries because they feel less confident in their ability to eventually pay it off – especially if they’re afraid of losing their job or are already unemployed.

The study found that women who have faced financial insecurity are substantially more conservative about how they use their cards.

“This gender differential is quite large,” researchers said. “A woman who has been unemployed is about twice as likely as a similar man to say that borrowing for luxuries is a poor decision.”

Credit as a lifeline

When I was laid off from a publishing job in my mid-20s, I too became much more cautious about how I used credit – especially for purchases I didn’t need. At the same time, I also was grateful for the small bit of credit I had available.

I didn’t have any intention of using credit unless I had to, but I saw my credit card as a last-ditch tool I could turn to in an emergency and a convenient way to finance everyday necessities until I found another job.

At just under 15 percent, the APR was high, but it was better than a payday loan and more reliable than trying to rely solely on the kindness of friends or family.

If ever get into a similar financial situation, I’ll do everything I can to avoid using plastic to finance my expenses. But I’ll also be sure to keep that credit available – just in case.

Lessons from the study (and life)

Although it’s never a good idea to rely on credit cards as a source of lost income, they can provide valuable liquidity when you’re in a financial crisis.

The key is to keep a basic card with as low a rate as you can qualify for and use it as sparingly as possible. A card with a 0 percent APR also can help you temporarily weather a financial crisis, as long as you don’t rack up so much debt that it overwhelms you.

That’s also why it’s so important to keep your credit score as high as possible, and to avoid overspending, when things are going well. You may one day need that healthy credit score to qualify for an emergency loan or basic card with an affordable APR.

See related: Poll: Women are better at credit than men, they just don’t know it, 4 credit lessons men can learn from women, 4 credit lessons women can learn from men

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