Studies have found that the type of currency a person uses when making a purchase can have a very real impact on how much they spend. Notably, people are likely to spend more money when they use a credit card, as opposed to when they use cash. In one study, 58% of people admitted that credit cards influence them to spend more.
This is notable because credit cards are more common than ever. A full 76% of people in the survey said that they preferred to shop at businesses where they could use a credit card, and 70% of them said that they used credit cards as their most frequent way to make a payment. They may use cash when they have to, but they prefer to use cards and will do so whenever possible.
Why do people spend more?
For one thing, impulse purchases are more common with credit cards. Even if someone does not have $100 in their bank account, they can still spend $100 on a credit card. Mentally, they just tell themselves that they will figure out how to pay the card off at the end of the month. It feels like a problem they can solve later, so they give in to the impulse.
Additionally, spending money on a credit card does not always feel like a “real” transaction. If someone has to hand $100 to a store owner to make a purchase, they are very conscious of the total amount of money that they are spending. But when they just swipe their credit card, even if the purchase is for slightly over $100, it does not feel like they have actually lost anything.
Again, they can mentally push the need to pay off the credit card into the future, making them feel more comfortable spending money that they cannot necessarily afford.
In some cases, overspending on credit cards, combined with excessively high interest rates, can lead to overwhelming debt. Those who are facing these issues need to know about bankruptcy and all their other legal options.