New reseach by an economist teamed with two neuroscientists has shown that paying by credit card people actually:
"balance the immediate pleasure of the prospective possession of a product with the immediate pain of paying for it...Emotion is as capable of assigning such a value as reason. Buying on credit, though, may be different. The abstract nature of credit cards, coupled with the deferment of payment that they promise, may modulate the “con” side of the calculation in favour of the “pro”."
So impulse buying is more likely with credit cards than with cash. Makes sense to me. And now there is scientific evidence.
For further evidence on pain avoidance see this NY Times article (in the Style section of all places) on how women pay with cash for luxury goods to hide their purchase from their husbands.
7 comments:
As I was reading this article I found it hard to articulate why I thought the way these women think is so messed up, until I read this quote from Kathleen Gurney: “If you have to hide, then you’re not really free and independent.” This is absolutely true. Instead of being sneaky, why not own up to what some may think are frivolous purchases? Also, do these women think that just because the purchase doesn't show up on a credit bill, their husbands don't know what's going on?
Another aspect of this article that I found almost alarming is that many of these women, who pay with cash, are hiding purchases that they are making with their own hard-earned money.
To be honest I found this article a little bizzare, almost Desperate Housewives-ish. I think everyone, male or female, occasionally feels the need to splurge on a purchase, but at least own up to it. It seems as if these women are more ashamed about their indulgences that worried about what their husbands will think.
I think your thought process for whether or not to purchase something is affected by many things (such as price, how much you need/want the item, and what mood you are in at the time). I know that sometimes I think of what I could get instead of such and such for the same price, sometimes of how much time I or one of my parents has spent toiling to acquire the money necessary to purchase it, and sometimes just of the displeasure with the price and the thought of handing over all the bills, or sometimes I want it enough not even to take those things into account. Obviously decision making when it comes to purchases is affected by a combination of emotions and reason. I do certainly agree that using a credit card reduces the cons and the misgivings about making a purchase and makes it easier to buy something without thinking of the consequences. I know that when I usually use a credit card is with things like filling up my gas tank, because this is an expensive transaction that I cannot immediately gain the pleasurable effects from (or maybe never will, by just burning the gas by driving to school). When the effects of the purchase are more immediate it is easier to hand over cash.
I found this article very interesting; it explores the brain activity involved in purchases and shopping yet even more impressively, links these impulses and/or decision making to basic human instinct (choosing a mate, deciding whether to confront an enemy, etc.). I totally agree with Loewenstein's statement concerning credit purchasing; it is most definitely the favored method of spending when the buyer is unsure of the price or worth of the item to him or her. Although this spending will burn a hole in his or her pocket later on, it exposes our procrastinate nature and how sometimes we enter a stage of denial in order to get what we want.
I found this article to be very interesting. I do believe that you tend to think less about losing money when you charge it rather than when you are paying in cash. When you charge things you don't visually see the money being deducted but when you pay cash you see the money being removed from your wallet. Larger purchases are often times put on credit card because you don’t have to worry about paying for them at that exact moment in time so you put it off in your mind until the bill comes. When you pay in cash you tend to think twice about if you really want something but when you use a credit card you have a more at ease attitude and you'll worry about it when the bill comes letting you splurge nice in a while.
This is interesting because it suggests that the theory behind they way people think when they are buying things is not just based on reason, that its based on emotion. This makes sense, because when I use spare change that I find lying around to buy something, or a debit card to buy gas, I don't feel like I'm losing anything. It seems like credit cards can plausibly boost consumtion in the future, if cash is used less and credit is used more. Although it may make for a few impulse purchases for some people, it will undoubtedly keep this economy consumer-driven.
credit cards are great for keeping people buying. and the article does show how people don’t mind spending money as much when they are just handing over some plastic instead of cash. credit cards keeping consumption up is good. but if everyone starts going into such high debt (like those weird shopoholics you see on TV going to rehab for buying everything they see) the money isn’t really going back into the system. if you don’t have money to pay your credit card bill you’re essentially paying with money that doesn’t exist and that’s really bad.
This article is very true. When I have my mothers credit card, i dont thnk abut the price of anything ! haha. Paying with cash def. makes you think twice about what you are spending.
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