As of 2022, the average American household carries $8,701 in credit card debt. With median, pre-tax household income sitting at about $4,920/month, a majority of these balances aren’t getting paid in full each billing cycle.

When a balance sits on your credit card, you’re more than likely incurring interest. Paying interest is not a positive outcome for an individual, yet we collectively continue making decisions that put us in bad financial situations.

Why do we act against our own self-interest? And what can we do to change our behavior? Let’s dive into some neuroscience to find out.

Your Baseline for Decision-Making

Each one of us can look at the same problem and see it very differently. When it comes to financial decisions, the two most prominent lenses we peer through are risk preference and time preference.

Risk preference refers to how much uncertainty you’re willing to take on. Optimistic people tend to be willing to take on more risk, as they believe everything will work out in the end. Those with more pragmatic lenses—the ones that illuminate all the different ways something could go wrong–may not be willing to take on as much uncertainty. This helps them avoid debt, but also deters them from potentially lucrative investing opportunities.

Time preference refers to your need for immediate rewards. When we’re looking at debt, that means that people on one side of the time preference spectrum are willing to take on debt for something they really want, even if there are negative financial consequences, while people on the other side of the spectrum are more likely to wait and save.

“Time preference pretty much refers to how patient people are,” says Gregory Samanez-Larkin, Assistant Professor of Psychology and Neuroscience at Duke University. “To measure it, we may ask research participants if they want $5 now or $7 in two weeks.”

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Samanez-Larkin says that your risk preference and time preference are likely a bit of both nature and nurture. We all have different baselines for feelings of exuberance or anxiety, but our experiences can affect that baseline, too.

He also notes that your risk and time preferences will vary based on context. For example, if you’re tired or hungry, you may make a completely different decision than if you were fully-rested and sated.

Debt Decisions Stimulate Your Brain

When you’re faced with a decision, there are two regions of your brain that start firing arousal signals: the nucleus accumbens and the insula.

Buried deep under the wrinkly, grey matter of your brain, nucleus accumbens trigger positive arousal signals. These are the signals that move you closer to taking action. For our purposes, they’re the signals that would get you to swipe your credit card or sign on the dotted line. They’re also powerful signals that keep people addicted—whether that be to substances or habits like shopping.

The insula triggers negative arousal signals. These signals can move you further from pursuing a course of action that would have negative consequences.

These signals are sent off through the brain, eventually synthesizing in the medial prefrontal cortex (MPFC.) Here, your brain will consider them against each other, helping you make a final—yet subjective–decision.

“It’s not just mathematical,” explains Samanez-Larkin, indicating that positive and negative arousal signals don’t simply cancel each other out until there’s more ‘pros’ than ‘cons’ or vice versa. “It’s subjective. You might really want something, and then you qualify that desire with how many extra hours you’d have to work to afford it, or how long it would take to ship to your house. The MPFC shows these subjectivity signals across all classes of goods—food, music, money, etc.”

He notes that this decision process is the same in animals, though those with larger cortexes will synthesize and qualify on a deeper level. For example, a rat—which has a comparatively small cortex—relies heavily on its past experiences with positive and negative punishment and reinforcement when making decisions.

As human beings with larger cortexes, we justify and qualify our decisions, projecting multiple possible outcomes for various potential decisions.

Real-World Decisions

Samanez-Larkin uses the example of purchasing designer sneakers to illustrate what this process feels like. You might think, ‘These sneakers look really cool. I want them, and I have been wanting them for a while. I’m going to treat myself.’

But then qualifying signals sent from the insula kick in.

‘Would these get here in time for the game?’

‘Can I really part with $450 right now?’

‘How much of a pain would it be to make sure I’m at home when the package hits my doorstep?’

Because the process is so messy and decidedly not mathematical, he says that you could face the exact same situation on two different days and make wildly different final decisions. Maybe on Monday you decided the shoes just weren’t worth the money—especially since five-day shipping wasn’t guaranteed.

But then on Tuesday, you might decide it’s a good idea to whip out the credit card.

“When you find yourself heavily tempted by a purchase, you might get this sense in the back of your mind that it’s a not a good idea,” Samanez-Larkin says. “Focus on that. Focus on all the reasons why it’s a bad idea. It might take a lot of work to convince yourself to make the right decision, but you should be able to chip away at that initial positive feeling—that desire.”

Because he recognizes how extremely difficult that process is, Samanez-Larkin believes structural or environmental supports would be more effective in helping individuals make good financial decisions. He cites minimum payment warnings on credit card statements as one such support that exists today.

This warning alerts you to how much money you could save if you paid more than the minimum required each month. By laying out the end results clearly in black and white, it allows your brain to process the massive consequences of delaying repayment. With this environmental support, you’re more likely to make a better financial decision regarding your debt.

Debt Leads to Financial Stress

Second only to concerns over the future of our nation, money is the number one source of financial stress in America. When you’re stressed out, your amygdala, which controls emotions and motivation, sends signals to your hypothalamus, indicating that there’s something wrong. When your hypothalamus thinks there’s something wrong, it preps your body for fight or flight.

Because you’ll need an energy boost to physically fight or run away, the hypothalamus sends signals to your adrenal glands through the nervous system. These signals say, ‘We need adrenaline! Stat!’

Adrenaline makes your heart pump faster, your lungs breathe deeper and releases energy stores into your bloodstream. These are all very positive things if you need to run or fight, but you can’t actually punch debt in the face. While you can psychologically run away from your money problems, physically running away from your credit card statement isn’t going to help you pay more than the monthly minimum.

The adrenaline didn’t resolve the source of your stress. When your brain continues to feel imminent danger, it sends a series of hormones on a journey through your pituitary glands into your adrenal glands, where cortisol is released to sustain high alert.

Paying off large amounts of debt can be a long process. It’s not too often you stumble upon a windfall that will make all of your financial problems go away at once. So when we experience financial stress, it’s often prolonged. Prolonged periods of heightened cortisol production are not good for the brain.

Elevated levels of cortisol—especially when sustained over a long period of time—can damage your brain. Your hippocampus takes the brunt of the damage. This portion of your brain is responsible for creating new neural pathways, but it can’t do that as effectively with high levels of cortisol.

Recent studies show that when your hippocampus is not working at full-speed, your memory suffers. Synaptic plasticity—which enables you to learn new skills or coping mechanisms—goes down. You’re more likely to be in a foul mood, and making good decisions becomes harder.

It’s easy to see why paying off debt or quitting a bad shopping habit is difficult when you know your ability to make decisions is impaired, and your ability to learn new habits is slowed. But knowing why something is happening does not justify excuses.

Samanez-Larkin—whose work focuses on how we make decisions rather than what happens to our brain as a result of stress—personally feels that we need to utilize that stress to get out of bad financial situations.

“I think you should be worried about debt in the long-term,” he says, “especially if you have the luxury of being able to deal with it. If you can’t feed your kids and you need to borrow to do that, it’s a different situation altogether. But if you make a decent salary, you shouldn’t carry a balance.”

Making Rational Decisions

Making the right decision and altering your financial habits won’t be easy. Not with cortisol pumping through your body. Not with your nucleus accumbens’ signals working to justify indulgence in your MPFC.

But it can be done. First, you’ll need to combat the stress so you can make clear-headed decisions.

Combatting Stress

Your body thinks it needs more oxygen. It thinks it needs to exert physicality in order to escape the stress it’s experiencing.

Give it what it thinks it needs. Practice deep breathing exercises. Go for a run or brisk walk to burn up all that extra energy.

Although scientists still aren’t sure why, having a tight social network also lowers stress levels. Our culture treats financial struggle as a taboo subject, so you’re going to have to proceed boldly as you open up about your debt and your fight to eliminate it. It may be awkward at first, but if you talk to the people who care about you, discussing your problems is a probable path to finding some emotional relief.

Combatting Debt

The first step to paying off your debt is looking it square in the face. Open all of your statements. Call all of your lenders to get current balances and interest rates. Once you know how much you owe, you can formulate a plan.

Go over your budget with a fine-tooth comb. Find areas where you could cut your spending, and apply that money directly to your debt. Figure out the max monthly payment you can afford without defaulting on other bills or going without sustenance. Pay that every single month until you’re back down to zero.

If your income will not allow you to pay your debts without losing housing or skipping groceries, look to state-run assistance programs at your Department of Public Welfare. Contact a credit counselor to see if you might benefit from their services.

Getting out of debt can be difficult, especially with your brain often working against you as it struggles to translate financial problems within a scaffolding system that has been built to combat physical danger. But in the end, you are the master of your own mind.