Credit cards provide people with ease in purchasing things. People only need to bring out these plastics, and they can buy a number of things that they want in no time. However, credit cards are not without their downsides.
If not used responsibly, credit cards can be utilized by people to acquire things that they cannot buy with their salary alone. Using credit cards comes with the responsibility of paying interest rates. However, there are cases when people cannot help but to purchase things incessantly, and as a result, their debts start to increase.
Studies have shown that people with credit cards tend to spend more. Customers are more willing to buy things when using plastics instead of cash. Other research also showed that people who prefer credit cards have different traits from those who are more willing to pay in cash.
Most studies focus on credit card premium and related psychological factors. It turns out that people feel less guilty when using credit cards compared with paying cash. Moreover, when tightwads and spendthrifts were considered, further studies showed that their differences are not that great when participants were asked to use credit cards for their purchase. In summary, credit cards make it less painful for people to pay for things regardless of whether they are tightwads or spendthrifts.
Aside from making payments less painful, credit cards also stimulate desire in people. In 1980s, experiments showed that willingness of people to make purchases was higher when they saw credit card logos. After almost 20 years, the same result was obtained by other experiments. Based on these studies, consumers associate credit card logos with consumption. Thus, when people see credit card logos, they are stimulated to make purchases.
In addition, credit card users are able to compare prices using benchmarks for their credit limits. Studies showed that high credit limits serve as indicators of potential future earnings. Thus, credit card users are apt to consider prices as low when they learn about such expected earnings. As result, they will more likely spend using their credit cards. Moreover, credit limits make people think that they are spending less compared when using the cash they have in hand.
In addition, people find it easier to remember their credit limits than their exact balance. For people with high outstanding balance, they are more afraid of maxing out their card than paying their debts. Still, it is inevitable that people are tempted to overspend. Those who ensure that they pay their balance worry very little, but those who alternately use cash and credit card or have credit card debt have bigger problems. Nevertheless, results of such studies should remind people how much they love buying things and the dangers of overspending when using credit cards.