If you think that a credit card can’t “force” you to overspend, you’re both right and wrong. People are ultimately responsible for the choices they make; that’s true. But decades of research have found that people aren’t always completely in control when using cards instead of cash.
Multiple studies show that the pieces of plastic in our wallets have the power to push us beyond our spending limits — sometimes literally. There’s documented proof, for instance, that the mere exposure to credit card logos can nudge consumers to pull out their plastic and spend more compared to when visual stimulation is absent.
If that visual stimulation isn’t enough, the temptation of credit card “rewards” adds an additional psychological tug to help you buy things you don’t need. You might be shocked to discover, for example, that in three months you’ve spent $1,000 more on groceries just to maximize your cash back bonus. Rewards are designed to encourage that type of behavior, and even the most financially disciplined consumers sometimes find them hard to resist.
In addition, simply having the option to pay with credit also increases consumers’ willingness to pay — and even to spend more on the same thing — than if cash were the only choice, according to the findings of an MIT study.
It’s less painful, after all, to hand over a card that will let you temporarily forget how much you’re about to lose than to part with a physical dollar bill. That numbing effect, combined with the ease of swiping a card, can condition people to habitually reach for their cards even when they know they shouldn’t.
If chronic overspending with plastic has led you down a path of endless debt, we can help. Americor Financial Services works directly with our clients to find their best possible option for getting rid of debt.