| November 18, 2011

Credit card use leads to more purchases, better feeling

One problem many consumers may face these days is that they spend a little more than they should when using their credit cards, but now new research shows that’s more that natural.

Credit card users are likely to spend more money than if they had paid cash, and will generally feel better about doing so, according to a study by Promothesh Chatterjee of the University of Kansas and Randall Rose of the University of South Carolina, published in the Journal of Consumer Research. In fact, consumers who use their credit cards to make a purchase will even exaggerate what they believe are the benefits of an item they’re purchasing when using credit. Conversely, paying with cash not only makes consumers more aware of the cost, but also the possible downsides that would come with a product.

This is generally because doling out cash to make a purchase, rather than simply swiping a card, makes consumers better understand how much they’re truly spending on a product, the report said. This theory isn’t new, though. Consumers have always been more likely to make larger purchases using credit cards rather than cash – this is known as the credit card premium – but this research suggests that consumers will also buy items they don’t actually want very much as well.

And now, the trend may become even more pronounced, the report said. The coming widespread adoption of swipeless credit card purchases, made possible with mobile payment systems such as Google Wallet, will likely only add to consumers’ ease with making purchases. For instance, if consumers feel the pinch when paying in actual cash, but not as much when swiping their credit card, then it may stand to reason that not even having to take their card out of a wallet to use it will lead to even less consideration.

Overspending on these accounts has led many consumers to take on more credit card debt than they can afford to pay back, and that in turn might lead them into serious financial trouble. For those who are facing bills they may not be able to afford to pay, it may be helpful to seek the help of a credit counseling agency, which can help them find a way to face their financial difficulties head-on.

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