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Why Do We Spend More When Using Credit Cards?

By Eva Norlyk Smith, Ph.D.
January 21, 2010
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You don’t need researchers Carnegie Mellon, Stanford and MIT to tell you that you spend more money when paying credit cards instead of cash while shopping. Unless you have the willpower of a Navy SEAL, this is an unfortunate fact of life, which most of us tend to ignore to the best of our ability.

Studies have shown that consumers, on average, spend 12-18 percent more when they go shopping with credit cards instead of cash. Researchers also found that on average, transactions at MacDonalds’ increased from $4.50 to $7.00 when people paid with credit cards instead of cash; for vending machines, the average transaction amount almost doubled.

There are numerous other studies that show what we already know: plastic is fantastic when it comes to making us part with our hard-earned money. But why do we tend to spend more when we pay with a credit card instead of with checks or cash? Well, according to a study by researchers at Carnegie Mellon, Stanford and MIT, we spend money till, literally, it hurts.

The researchers looked at what happens in the brain when we make decisions about spending money. In a recent study published in the journal Neuron, the researchers took MRI brain scans of 26 adults, who were given $20 and the option to either spend it on one or several products or keep it.

The study participants were shown a photo of products they could buy with the money, and then the price. If they saw a product they liked, it activated a part of the brain associated with experiencing pleasure. However, if they then saw a price that was too high, it activated a part of the brain associated with pain processing.

In short, if the results of the study hold up, the “pain of paying” isn’t just a metaphorical expression; it has a physical basis in how your brain reacts when paying for purchases. Yes, parting with hard-earned cash, literally hurts.

The problem with credit cards is that they’re more like play money; after all you’re simply swiping a piece of plastic. The bill comes later, and it folds many small “pains” of paying into, admittedly, one big whopper. But even so, it is less immediate than having to part with your hard-earned cash at the check-out register.

“Credit cards effectively anesthetize the pain of paying,” says Professor George Loewenstein of, Carnegie Mellon, one of the researchers behind the study. “You swipe the card and it doesn’t feel like you’re giving anything up to make the purchase, unlike paying cash where you have to hand over bills.”

So, are credit cards yet another product, like cigarettes, alcohol, and yum, chocolate, which shortchanges our brain circuitry into making decisions our rational self would disapprove of? Well, that’s for you and your wallet to decide. However, next time you find yourself struggling with that existential human decision, to buy or not to buy, try leaving your credit cards in your wallet, and then make the decision.




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