Do you generally spend more when using credit cards?
Do you generally spend more when using credit cards?
Many studies have demonstrated that we tend to spend more over time if we use credit cards as opposed to cash.
However, it appears that MANY Bogleheads use cash back credit cards or credit cards with other incentives, in some cases for all their spending.
Perhaps those with cash back/other incentives spend so much on their credit card that the cash back/other incentives are cancelled out by greater spending.
In this survey, cash includes the use of debit cards.
However, it appears that MANY Bogleheads use cash back credit cards or credit cards with other incentives, in some cases for all their spending.
Perhaps those with cash back/other incentives spend so much on their credit card that the cash back/other incentives are cancelled out by greater spending.
In this survey, cash includes the use of debit cards.
Last edited by mesaverde on Tue Jan 06, 2015 12:54 pm, edited 3 times in total.
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Re: Do you spend more when using credit cards?
While I would like to say there is no difference.... I expect the convenience of credit cards DO in fact cause me to buy more than I would otherwise. I've never tried to test it but just a feeling.....
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Re: Do you spend more when using credit cards?
The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
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Re: Do you generally spend more when using credit cards?
I probably do, but I have never really used cash. Credit cards definitely help you lose track of spending until the bill comes due.
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Re: Do you spend more when using credit cards?
Do you have a statistically significant dataset to back that up?VictoriaF wrote:Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
In all seriousness, Victoria is as always bang on the money. Lots of data and tons of profits to prove she's right.
Re: Do you generally spend more when using credit cards?
I only use cash for very small purchases and vendors who don't take credit cards. I use ACH or wire transfers for large amounts when the recipient doesn't take credit cards or charges a fee. I use credit cards for just about everything else.
Does that mean I spend more when using credit cards?
Does that mean I spend more when using credit cards?
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Re: Do you generally spend more when using credit cards?
Businesses still accept cash? Really? I mean legitimate businesses?
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Re: Do you generally spend more when using credit cards?
For younger folks maybe.Gropes & Ray wrote:I probably do, but I have never really used cash. Credit cards definitely help you lose track of spending until the bill comes due.
I'm finishing up a trip right now and check my main card online every so often to verify correct charges.
Just paid off my balances and it doesn't close till the 9th of each month...
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Re: Do you generally spend more when using credit cards?
Like others above: Cash, what's that?
Although well aware of the studies showing an increase in spending, I have no way to compare our spending because we've been overwhelmingly credit card for many years (prior to 1990). I download transactions every night to verify; maybe that helps curb spending? Maybe not?
Although well aware of the studies showing an increase in spending, I have no way to compare our spending because we've been overwhelmingly credit card for many years (prior to 1990). I download transactions every night to verify; maybe that helps curb spending? Maybe not?
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Re: Do you generally spend more when using credit cards?
Because we could just "write a check" if we didn't use a charge card, there just isn't any difference.
We don't need to worry about keeping wads of cash on us.
I can't imagine being in the store for a new vacuum and making the decision to purchase a more expensive model "because I was using a charge card".
Or doing that because it was online and I was obviously charging it.
However, for those living "closer to the edge", this might be more of a problem, especially if they then chose a more expensive <whatever> because it was "just going to be charged anyway".
Not sure how this would be done, but have there been any studies of "financially prudent" vs. "not financially prudent" people who use charge cards all along the wealth spectrum?
For those using debit cards, at the lower end, "running out of money" would limit the effect of "spending more", although perhaps not at the "cost per item" level...?
Probably all too obviously, I'm not especially familiar with the research on this.
RM
We don't need to worry about keeping wads of cash on us.
I can't imagine being in the store for a new vacuum and making the decision to purchase a more expensive model "because I was using a charge card".
Or doing that because it was online and I was obviously charging it.
However, for those living "closer to the edge", this might be more of a problem, especially if they then chose a more expensive <whatever> because it was "just going to be charged anyway".
Not sure how this would be done, but have there been any studies of "financially prudent" vs. "not financially prudent" people who use charge cards all along the wealth spectrum?
For those using debit cards, at the lower end, "running out of money" would limit the effect of "spending more", although perhaps not at the "cost per item" level...?
Probably all too obviously, I'm not especially familiar with the research on this.
RM
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Re: Do you generally spend more when using credit cards?
I don't think I spend more when using a CC. Generally I use a card because I don't want the hassle or time involved with writing a check or carrying enough cash to pay for anticipated or not anticipated purchases.
I suppose there is the circumstance when making a significant purchase that I might not make the purchase immediately if I couldn't use a CC. I used to always carry a blank check or two if I didn't have my check book with me, but I no longer do that.
I suppose there is the circumstance when making a significant purchase that I might not make the purchase immediately if I couldn't use a CC. I used to always carry a blank check or two if I didn't have my check book with me, but I no longer do that.
Bob
Re: Do you generally spend more when using credit cards?
Yes.
I didn't start using credit cards until I was over 35. And absolutely no doubt about it....I spend a little more now because of the cards. But I don't consider that a bad thing.
I didn't start using credit cards until I was over 35. And absolutely no doubt about it....I spend a little more now because of the cards. But I don't consider that a bad thing.
Re: Do you spend more when using credit cards?
+1rob wrote:While I would like to say there is no difference.... I expect the convenience of credit cards DO in fact cause me to buy more than I would otherwise. I've never tried to test it but just a feeling.....
I think it also depends on your modus operandi , my DW and I have a budget with personal weekly cash allotments ; if I restrict my spending for the week only on things that my cash covers, then my spending is automatically capped .
But I briefly looked at the annual Net Worth survey and it's obvious that it doesn't reflect a cross section of middle America ; I would guess that many BHeads are not on a budget and wouldn't have thoughts about which approach saves money .
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Re: Do you generally spend more when using credit cards?
What about an option that I spend less if I use credit card?
For us we pick up a cash bonus so we are ahead. For some people they will spend less if they just use a CC because the spouse will see what they are spending, give them a handful of cash and its spent at the strip club
For us we pick up a cash bonus so we are ahead. For some people they will spend less if they just use a CC because the spouse will see what they are spending, give them a handful of cash and its spent at the strip club
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Re: Do you generally spend more when using credit cards?
For small day-to-day purchases, there is no effect for me. I carry enough cash, and payment method is somewhat arbitrary. In recent years I've found myself more likely to pay for $20-100 items with credit card, but make correspondingly fewer visits to the ATM.
For large purchases ($1000 and up), I'm not sure it makes much difference (other than the hassle of getting someone to take a check, or getting cash from a bank), because those purchases are generally planned and evaluated ahead of time.
It's the purchases for amounts in between where there is more difference for me. A credit card probably makes me somewhat more likely to make a "purchase of opportunity", where if I had to go to the bank to get cash, it might make me less likely to actually return and buy the item.
I personally don't happen to use the "credit" feature of credit cards, a debit card would work the same way for me (but I prefer the additional protection layer of a credit card).
My view is that credit cards significantly increase economic activity and efficiency, which is a good thing. Checks had a similar effect vs cash (and cash vs barter, if you go back far enough).
For large purchases ($1000 and up), I'm not sure it makes much difference (other than the hassle of getting someone to take a check, or getting cash from a bank), because those purchases are generally planned and evaluated ahead of time.
It's the purchases for amounts in between where there is more difference for me. A credit card probably makes me somewhat more likely to make a "purchase of opportunity", where if I had to go to the bank to get cash, it might make me less likely to actually return and buy the item.
I personally don't happen to use the "credit" feature of credit cards, a debit card would work the same way for me (but I prefer the additional protection layer of a credit card).
My view is that credit cards significantly increase economic activity and efficiency, which is a good thing. Checks had a similar effect vs cash (and cash vs barter, if you go back far enough).
Re: Do you generally spend more when using credit cards?
I'd like to say "no," but statistically that's unlikely. I've also read that credit users spend 10-18% more on average. (Which makes it interesting that some businesses try to steer credit users away in order to avoid the fees. Shun +10% in sales to avoid a 3% expense. Huh.)
On the other hand, I tend to spend cash readily just so I don't have to worry about carrying it around.
I'd love it if more information about the transactions was entirely encrypted though. The amount and level-of-detail of datamining done for advertising purposes these days is just insane. At some point I won't even need to shop online; the servers out there will anticipate what I need to a 99.96% confidence level and it'll just show up and autobill me.
On the other hand, I tend to spend cash readily just so I don't have to worry about carrying it around.
I'd love it if more information about the transactions was entirely encrypted though. The amount and level-of-detail of datamining done for advertising purposes these days is just insane. At some point I won't even need to shop online; the servers out there will anticipate what I need to a 99.96% confidence level and it'll just show up and autobill me.
Re: Do you generally spend more when using credit cards?
My brain treats a credit card as "cash" ,as I rarely use cash.Everything is put on a cash back credit card.So the answer would be "no" I do not spend more than if I had green cash in hand.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: Do you generally spend more when using credit cards?
I find that I spend more when using credit cards even though I try to keep track of them very carefully. I find my best cash back cards it always seems to take a few more days for purchases to post or show up as pending compared to my debit card which posts instantly, so sometimes I lose track and think something has gone through when it hasn't yet. I've been trying to cut back on just as much spending as possible regardless of cash back. To me its not worth it for day to day purchases.
Re: Do you spend more when using credit cards?
"When it comes to credit cards, it's well established in the field of behavioral economics that people who use plastic are unconsciously willing to spend more than those who pay with cash, a phenomenon known as the "credit card premium." That's because there's an emotional pain associated with handing over hard currency that curbs spending, as opposed to mindless purchasing when forking over plastic."VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
http://articles.chicagotribune.com/2011 ... ebit-cards
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: Do you spend more when using credit cards?
Thank you, Toons!Toons wrote:"When it comes to credit cards, it's well established in the field of behavioral economics that people who use plastic are unconsciously willing to spend more than those who pay with cash, a phenomenon known as the "credit card premium." That's because there's an emotional pain associated with handing over hard currency that curbs spending, as opposed to mindless purchasing when forking over plastic."VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
http://articles.chicagotribune.com/2011 ... ebit-cards
Victoria
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Re: Do you generally spend more when using credit cards?
I have no idea, since I can't remember the last time I used actual cash for anything other than coffee, and recently I've been buying that with my CC too. I write three or four checks a month (cleaners, chiropractor, lawn service) and everything else is CC or bank draft.
I do keep an eye on my monthly spending via Quicken, but I am lucky enough not to need to be fanatical about it. A few additional meals out pale in comparison to the costs of maintaining my house.... I am more careful on trips, as I have an average daily budget in mind then, but cash vs CC makes no difference.
I do keep an eye on my monthly spending via Quicken, but I am lucky enough not to need to be fanatical about it. A few additional meals out pale in comparison to the costs of maintaining my house.... I am more careful on trips, as I have an average daily budget in mind then, but cash vs CC makes no difference.
Thursday's child has far to go
Re: Do you generally spend more when using credit cards?
Two situations, in which I pay more using credit cards than cash are as follows:
1. Leaving a tip at a restaurant.
2. Using foreign currency in places that don't accept cards.
In the second case, I apply a different logic to a potential purchase. Instead of thinking how I could use the item ("credit card logic"), I think how I could live without the item ("cash logic").
Victoria
1. Leaving a tip at a restaurant.
2. Using foreign currency in places that don't accept cards.
In the second case, I apply a different logic to a potential purchase. Instead of thinking how I could use the item ("credit card logic"), I think how I could live without the item ("cash logic").
Victoria
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Re: Do you generally spend more when using credit cards?
I'm going to go with a "Yes," because I live in a small town and wouldn't otherwise buy clothes or shoes or many other things, which are freely available to me on the internet.
But since that's behavior that my budget takes into consideration and I keep within my budget, I don't see it as a problem. I like having winter boots.
But since that's behavior that my budget takes into consideration and I keep within my budget, I don't see it as a problem. I like having winter boots.
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Re: Do you generally spend more when using credit cards?
A purchase is a purchase to me. I don't give a moment's thought as to how it will be funded. I've had credit cards for >40 years and never carried a balance except for the odd months years ago when a statement would get lost by the trusty USPS.
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Re: Do you generally spend more when using credit cards?
For us, there is definitely a correlation with "spending more on charge cards" (almost always credit, not debit, for security) and "spending more because we *have* more to spend".
We are at a point where we want to start spending (can't take it with us, have no heirs needing support), and we aren't getting younger.
When we had less - not all that long ago - we spent less.
But we still charged just about everything.
Figured we might as well use the points rather than not get anything at all "back".
But we spent it somewhat on different things, emphasis on "things".
At this point in our lives, we don't need many "things".
We spend a lot more on travel now.
Comfortable travel.
Agree with Doom&Gloom about purchases, if not philosophy of life!
RM
We are at a point where we want to start spending (can't take it with us, have no heirs needing support), and we aren't getting younger.
When we had less - not all that long ago - we spent less.
But we still charged just about everything.
Figured we might as well use the points rather than not get anything at all "back".
But we spent it somewhat on different things, emphasis on "things".
At this point in our lives, we don't need many "things".
We spend a lot more on travel now.
Comfortable travel.
Agree with Doom&Gloom about purchases, if not philosophy of life!
RM
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Re: Do you spend more when using credit cards?
I think it is important here to caution against extrapolating observed behavior of large groups of people to individuals.Toons wrote:"When it comes to credit cards, it's well established in the field of behavioral economics that people who use plastic are unconsciously willing to spend more than those who pay with cash, a phenomenon known as the "credit card premium." That's because there's an emotional pain associated with handing over hard currency that curbs spending, as opposed to mindless purchasing when forking over plastic."VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
http://articles.chicagotribune.com/2011 ... ebit-cards
But maybe that's just my overconfidence talking
Re: Do you spend more when using credit cards?
Agree. I doubt many tracked spending with cash vs credit over extended period of time to say they spend about the same. However, when you spend more, you also get more, in quantity or quality or both, which is not a bad thing.VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.
Victoria
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Re: Do you generally spend more when using credit cards?
VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
But yet see this:
http://www.andrew.cmu.edu/user/incekara ... .09.21.pdf
Re: Do you generally spend more when using credit cards?
I've been on both sides of this, and could vote either way at certain points in my life.
Back when we were actually using credit cards for credit, we would spend more, thinking "it's being charged, what's a couple more dollars every month."
Now that we've learned what credit cards really cost, we use a rewards card for most purchases, but pay it off every month, so I don't believe that we are spending any more since we are looking at the total expenditures for the month, just like if we were paying cash.
Dave
Back when we were actually using credit cards for credit, we would spend more, thinking "it's being charged, what's a couple more dollars every month."
Now that we've learned what credit cards really cost, we use a rewards card for most purchases, but pay it off every month, so I don't believe that we are spending any more since we are looking at the total expenditures for the month, just like if we were paying cash.
Dave
Re: Do you generally spend more when using credit cards?
I'm sure we do. But there's things that can only be purchased with cards. Plane tickets, hotel reservations ect. I actually get criticized for using cash, which I prefer to do for smaller purchases. Considering we get 2% back and spend a lot annually my wife uses the CC for everything. I actually proposed an experiment where we would try using cash for a month to see if it reduced our spending and that suggestion was met with a reply of "that's stupid, I don't want to carry that much cash around". So I guess I'll never know
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Re: Do you generally spend more when using credit cards?
The key counterargument is this statement in the abstract of the linked article:2stepsbehind wrote:VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
But yet see this:
http://www.andrew.cmu.edu/user/incekara ... .09.21.pdf
This outcome may be specific to the nature of the experiment, which was conducted in a cafeteria and where (1) the purchases were small and regular and (2) the purchases were necessary.Elif Incekara-Hafal and George Loewenstein wrote:However, the use of credit cards has a differential impact on spending for revolvers (who carry debt) and convenience users (who do not): Revolvers spend less when induced to spend with a credit card, whereas convenience users display the opposite pattern.
Victoria
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Re: Do you generally spend more when using credit cards?
Probably!
As a mid 20ish person, I have never made a major purchase with physical cash (got my debit card at 16, switched to using credit cards after graduating college). Would I still feel the "emotional pain" cited above when using it? I attribute the increased spending with cards to convenience (no need to ATM hunt or carry a larger wallet) rather than "pain" when spending. I currently use cash only when I am going out, to avoid issues that can be caused by card usage (difficulties splitting checks, bartenders holding on to your card when you have an open tab, etc).
Also as noted by previous posters, there are some things that cannot be bought with physical cash. As a car-less person, most of my purchasing dollars are spent online. If I were restricted to using physical cash, I would certainly spend less money. And spend more time on transporting toilet paper
For purchasing with debit vs. credit cards, I don't think it makes a large difference for me. I pay off my cards every month (usually weekly). Switching from debit to credit for me was simply swapping one card for another, and a bit more bookkeeping.
As a mid 20ish person, I have never made a major purchase with physical cash (got my debit card at 16, switched to using credit cards after graduating college). Would I still feel the "emotional pain" cited above when using it? I attribute the increased spending with cards to convenience (no need to ATM hunt or carry a larger wallet) rather than "pain" when spending. I currently use cash only when I am going out, to avoid issues that can be caused by card usage (difficulties splitting checks, bartenders holding on to your card when you have an open tab, etc).
Also as noted by previous posters, there are some things that cannot be bought with physical cash. As a car-less person, most of my purchasing dollars are spent online. If I were restricted to using physical cash, I would certainly spend less money. And spend more time on transporting toilet paper
For purchasing with debit vs. credit cards, I don't think it makes a large difference for me. I pay off my cards every month (usually weekly). Switching from debit to credit for me was simply swapping one card for another, and a bit more bookkeeping.
Last edited by shorvath on Tue Jan 06, 2015 2:56 pm, edited 1 time in total.
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Re: Do you generally spend more when using credit cards?
You may be missing more than extra savings. Experimentation is good for a marriage.JonnyDVM wrote:I'm sure we do. But there's things that can only be purchased with cards. Plane tickets, hotel reservations ect. I actually get criticized for using cash, which I prefer to do for smaller purchases. Considering we get 2% back and spend a lot annually my wife uses the CC for everything. I actually proposed an experiment where we would try using cash for a month to see if it reduced our spending and that suggestion was met with a reply of "that's stupid, I don't want to carry that much cash around". So I guess I'll never know
Victoria
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Re: Do you generally spend more when using credit cards?
I use credit cards so I can automate my budget with minimal effort. Using all cash would make budgeting more challenging, and would likely cause me to spend more.
I also save about 2-3% using credit cards through cash back, promotionals, etc. If I went to all cash, I'd probably only have savings on auto gas.
I also save about 2-3% using credit cards through cash back, promotionals, etc. If I went to all cash, I'd probably only have savings on auto gas.
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Re: Do you generally spend more when using credit cards?
Many Bogleheads find it painful to spend. By using a credit card, it's less painful to do what's right. That's the flip side of the studies you cite. For the average American, using cash instead of credit cards will probably increase the savings rate. If yours is too high already, why not use a card that adds convenience, gives you some cash back, and makes spending less painful?
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Re: Do you generally spend more when using credit cards?
why is there no option for spend less with credit card. poll bias perhaps? I find cash easier to spend and less trackable.
John
John
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Re: Do you generally spend more when using credit cards?
I was trying to buy a new wallet recently, and I was intrigued to see how difficult it was to find wallets with coin pockets on US sites. They were much more common on amazon.ca and amazon.co.uk, presumably because coins have sufficient value in those countries that people actually want to carry them around.
Re: Do you spend more when using credit cards?
Am I the only one who regards this as bizarre? Don't people realize that $10 is $10, whether it's in the form of a paper bill, a credit card payment, a pile of quarters or whatever? Do people really ignore (or pay less attention to) price when paying with a credit card?That's because there's an emotional pain associated with handing over hard currency that curbs spending, as opposed to mindless purchasing when forking over plastic.
Re: Do you generally spend more when using credit cards?
I find coins to be annoying and avoid carrying them if at all possible.fposte wrote:I was trying to buy a new wallet recently, and I was intrigued to see how difficult it was to find wallets with coin pockets on US sites. They were much more common on amazon.ca and amazon.co.uk, presumably because coins have sufficient value in those countries that people actually want to carry them around.
Re: Do you generally spend more when using credit cards?
99% of our purchases are CC and has been for many years. I can't really think of anything that I buy on a CC that I wouldn't buy with cash.
Having said that, when I was much younger and didn't have any cash left over each month, I imagine I did spend more on credit cards since I didn't have to actually pay it all off at one time. That kind of thinking got us into serious debt ($25K). Once we got out of that hole, we pretty much stopped using CC for a number of years. Since then, if we can't pay it off, we don't charge it. I've been know to go online and pay my credit card bill several times a month.
Each year we take a family vacation that is mostly paid for with travel rewards from credit cards. Last year, I calculated we saved almost $4K in hotel and airline tickets.
Having said that, when I was much younger and didn't have any cash left over each month, I imagine I did spend more on credit cards since I didn't have to actually pay it all off at one time. That kind of thinking got us into serious debt ($25K). Once we got out of that hole, we pretty much stopped using CC for a number of years. Since then, if we can't pay it off, we don't charge it. I've been know to go online and pay my credit card bill several times a month.
Each year we take a family vacation that is mostly paid for with travel rewards from credit cards. Last year, I calculated we saved almost $4K in hotel and airline tickets.
Re: Do you generally spend more when using credit cards?
I don't know if I would spend more if I paid with cash, but when I go to buy something I think about (or check) my bank account balance and not my credit card balance. I pay the credit card off weekly so rarely carry a balance for very long and it is almost like cash for me. In fact, I've never carried a balance over a month. I mainly used it for the cash back benefits. So I would say no, I don't spend more.
With that said, my older sibling lacks the self-control to use a credit card responsibly and doesn't have one anymore. I also have a number of family members with credit card debt, so I would suspect most people do spend more with credit cards. I think Bogleheads are probably a majority of the minority of society that has above average financial self-control and self-discipline.
With that said, my older sibling lacks the self-control to use a credit card responsibly and doesn't have one anymore. I also have a number of family members with credit card debt, so I would suspect most people do spend more with credit cards. I think Bogleheads are probably a majority of the minority of society that has above average financial self-control and self-discipline.
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Re: Do you generally spend more when using credit cards?
As opposed to the experiments "on the other side" which involved business students bidding for some completely discretionary good? The question is whether any of the experiments actually adequately attempt to capture how "normal" individuals use a credit card. Due to the heterogeneity among the populace, I don't think there can be any absolutes drawn. Will some people spend more with a credit card, yes? Just as some people will buy the cereal at eye-level. However, if I go into the grocery store looking for Honey Bunches of Oats with strawberries, whether it is at eyelevel or on the bottom shelf will be irrelevant.VictoriaF wrote:The key counterargument is this statement in the abstract of the linked article:2stepsbehind wrote:VictoriaF wrote:The statements about overspending are not hearsay but are based on controlled experiments that produced statistically significant results. However, I don't think you will get accurate responses here. Overconfidence is a common cognitive bias that afflicts the Bogleheads as much as, if not more so than, other mortals.mesaverde wrote:Many say that we tend to spend more over time if we use credit cards as opposed to cash.
Victoria
But yet see this:
http://www.andrew.cmu.edu/user/incekara ... .09.21.pdfThis outcome may be specific to the nature of the experiment, which was conducted in a cafeteria and where (1) the purchases were small and regular and (2) the purchases were necessary.Elif Incekara-Hafal and George Loewenstein wrote:However, the use of credit cards has a differential impact on spending for revolvers (who carry debt) and convenience users (who do not): Revolvers spend less when induced to spend with a credit card, whereas convenience users display the opposite pattern.
Victoria
Re: Do you generally spend more when using credit cards?
My DW spends cash at the store if it's under a couple of bucks. I asked her why and she said she didn't want to "bother" the cashier with a credit card. I told her it was much more of a "bother" to take cash and count back coins then it is to just swipe a card.richard wrote:I find coins to be annoying and avoid carrying them if at all possible.fposte wrote:I was trying to buy a new wallet recently, and I was intrigued to see how difficult it was to find wallets with coin pockets on US sites. They were much more common on amazon.ca and amazon.co.uk, presumably because coins have sufficient value in those countries that people actually want to carry them around.
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Re: Do you generally spend more when using credit cards?
I personally don't like carrying around a lot of cash and have mostly been charging expenses on my credit cards since college. We pay off the cards in full every month and I do pay for items under $10 or $15 with cash. We do carry around a set amount of cash every month for incidentals but like the convenience of credit cards and use it for most expenses. We write checks for the places that don't accept credit cards. We pay credit cards via phone and it is deducted directly from our checking account. We like getting 2%, warranties, travel insurance and other protections from our credit cards. Hard to say whether we'd spend less if we used cash for everything and don't really plan to switch to no credit cards at any point in our future.
Our adult kids also enjoy the convenience of credit cards over cash; they pay balances in full every month as well and don't pay finance or late charges. S loves getting all the benefits from new credit cards and has quite a few. He has a credit score of high 700s; H & I have credit scores in the 800s, I believe. Don't know D's credit score.
Since we all are pretty frugal and live well below our means, I'm not too concerned about our spending.
Our adult kids also enjoy the convenience of credit cards over cash; they pay balances in full every month as well and don't pay finance or late charges. S loves getting all the benefits from new credit cards and has quite a few. He has a credit score of high 700s; H & I have credit scores in the 800s, I believe. Don't know D's credit score.
Since we all are pretty frugal and live well below our means, I'm not too concerned about our spending.
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Re: Do you generally spend more when using credit cards?
Gave this some more thought. I recently spent a couple of months in Europe. I visited eight countries, using mostly cash in some and mostly CCs in others. What I spent had nothing to do with how I was paying, and everything to do with how much things cost.
For example, in Romania, where I mostly spent cash, I took quite a few taxis, since they were (very) cheap. In France, where I mostly used CCs, I took no taxis, relying on feet and public transport, since taxis were expensive.
I don't think you can make a generalization about this that applies to everyone.
For example, in Romania, where I mostly spent cash, I took quite a few taxis, since they were (very) cheap. In France, where I mostly used CCs, I took no taxis, relying on feet and public transport, since taxis were expensive.
I don't think you can make a generalization about this that applies to everyone.
Thursday's child has far to go
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Re: Do you generally spend more when using credit cards?
Yes, I have observed myself spending more when using a CC than using cash.
It is not a ruinous amount, but small amounts do add up eventually.
I use cash almost all the time. I do not like the "CC tax" that is imposed on merchants,
which therefore gets passed along to all customers.
It is not a ruinous amount, but small amounts do add up eventually.
I use cash almost all the time. I do not like the "CC tax" that is imposed on merchants,
which therefore gets passed along to all customers.
Re: Do you generally spend more when using credit cards?
I didn't answer because we've never experimented with using only cash (or only credit cards for that matter) and comparing the results, so haven't really 'found' anything about it. And even if we tried such an experiment our spending pattern is noisy, which I *have* found by pretty closely tracking what we spend over around 25 yrs. However I don't particularly doubt that controlled experiments would show at least somewhat more spending with credit cards for most people, that's my intuition also.
My tendency is to spend too little and be a miser so if credit cards blunt that tendency, it's fine. I spend little cash, paper money 'cash', just rarely for something where they'll give a discount for cash, like some auto body work I had done is last time I can recall, beside Dunkin Donuts or something. We pay by electronic debit for bills where they won't take credit cards, don't know if that counts as 'cash'. My wife is more normal about save/spend than I am, but not given to overspending either. She spends paper money on social and special shopping activities in the immigrant community from her home country, where people are more cash oriented. But that's an extra itself so isn't helping us to spend less. But we don't need to spend less, basically, it's not a particular goal.
And the credit card gives you cash back, while you're not going to affect the CC fees merchant pay by more than .000..1% by paying cash, but you'll forego 100% of the cash back, so that argument doesn't make sense, to me.
My tendency is to spend too little and be a miser so if credit cards blunt that tendency, it's fine. I spend little cash, paper money 'cash', just rarely for something where they'll give a discount for cash, like some auto body work I had done is last time I can recall, beside Dunkin Donuts or something. We pay by electronic debit for bills where they won't take credit cards, don't know if that counts as 'cash'. My wife is more normal about save/spend than I am, but not given to overspending either. She spends paper money on social and special shopping activities in the immigrant community from her home country, where people are more cash oriented. But that's an extra itself so isn't helping us to spend less. But we don't need to spend less, basically, it's not a particular goal.
And the credit card gives you cash back, while you're not going to affect the CC fees merchant pay by more than .000..1% by paying cash, but you'll forego 100% of the cash back, so that argument doesn't make sense, to me.
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Re: Do you generally spend more when using credit cards?
This question may be backwards.
When I am spending a larger amount, I use my credit card.
When I am spending a small amount, I use cash.
I do not vary my intended purchase depending on my payment method, I vary my payment method depending on my purchase size.
Ralph
When I am spending a larger amount, I use my credit card.
When I am spending a small amount, I use cash.
I do not vary my intended purchase depending on my payment method, I vary my payment method depending on my purchase size.
Ralph
Re: Do you generally spend more when using credit cards?
I use credit cards mostly. But I don't live on a budget. So I don't know.
cheers ... -Mark |
"Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau |
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- Doom&Gloom
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Re: Do you spend more when using credit cards?
I didn't find it bizarre exactly. It is simply someone trying to "create" an explanation for the behavior they observed. If that statement were included (and it is difficult to tell from the quotation) as part of the "study," that would be the point at which I tossed it into the trash can.richard wrote:Am I the only one who regards this as bizarre? Don't people realize that $10 is $10, whether it's in the form of a paper bill, a credit card payment, a pile of quarters or whatever? Do people really ignore (or pay less attention to) price when paying with a credit card?That's because there's an emotional pain associated with handing over hard currency that curbs spending, as opposed to mindless purchasing when forking over plastic.