Plenty of studies have shown that consumers tend to spend more when they use a credit card than when they pay with cash or check.
Credit cards are easy to swipe. The purchases often don’t seem as real because you can pay them over time. There’s no “pain” of counting out bills or calculating a balance in a checkbook.
But two authors of a new study in the Journal of Consumer Research have found that credit cards are influencing not just how much we spend, but how we feel about the items we’re buying.
Their study shows that under the spell of credit cards, we are more likely to focus on the positive aspects of the purchase and not on details, such as cost and how we’re really going to use it. Ignoring those aspects can lead to overspending or buying things we don’t need.
Subjects were “primed” to think about credit or cash
In the study by Promothesh Chatterjee, assistant professor of marketing at the University of Kansas, and Randall L. Rose, chair and professor in the Moore School of Business at the University of South Carolina, test subjects were “primed” to think about either credit cards or cash by playing a series of word games.
Then they were given information about things they could buy. Those who were primed to think about credit cards were less likely than those primed for cash to remember details such as cost when they considered objects such as tablet computers, iPhones and cameras.
All too often, it doesn’t take much for us to be distracted by marketing messages, the study found.
“We do a lot of day-to-day things on autopilot and that’s where we get influenced,” Chatterjee says.
Some elements of the Chatterjee-Rose study expand on previous similar research, including studies that have shown people using credit cards or debit cards were more likely to make impulsive purchases at the grocery store, buying cookies, chips, cakes and making other unhealthy choices.
Chatterjee says previous research has also shown that just by seeing a logo for a credit card company such as MasterCard or Visa in a store window or at a register may nudge a consumer to think about items in a different way and be less concerned about cost or other negative attributes of the product.
The research could have implications for other areas, including the way social welfare payments are made, for instance. According to the National Consumer Law Center, 40 states now make unemployment payments with prepaid debit cards.
While debit cards are similar to cash in how they work, they are more similar to credit cards in the way they look. It’s possible making the payments this way could influence spending behavior, Chatterjee says.
“That’s a fruitful area to research,” he says. “It could definitely have policy implications.”
Jill Norvilitis, professor of psychology at Buffalo State College in New York, said we are conditioned early on to think of credit cards as a means to get to where you want to go. “(Credit card companies) give you the impression that that’s the life you want and so they’re teaching you to focus on those benefits,” she says.
And it doesn’t take much to get us thinking about the benefits of credit cards, she says.
“What I really liked about this study is they did four separate studies and each was a relatively simple manipulation. They didn’t do a lot to prime this cash or credit idea. And yet, they got the effects in each of the four studies.”
Psychology of abstract payments
Art Markman, Professor of Psychology and Marketing at the University of Texas at Austin, says the study highlights what happens psychologically when payments become more abstract, as they do with credit cards.
“What happens when you think of things abstractly is you tend to focus on the overall benefits of something,” says Markman, author of “Smart Thinking, Three Essential Keys to Solve Problems, Innovate and Get Things Done,” due out in January 2012.
He gave an example of someone recommending a conference six months in advance. “You decide to go because all you’re thinking about is how much fun it would be to do this. And then the week before you go, you ask, ‘how could I have said yes to this? I have all these things to do.’” You’re just as busy when you say yes as you are when you go, but the difference is “you’re not thinking about all those specifics.”
The same thing is happening with credit cards, he says. “You’re thinking just about the benefit of the product and not thinking about the specifics, such as how am I going to pay for this thing and … what am I actually going to use it for?”
Given consumers’ weaknesses in this area, there’s a huge opening for marketers to match their messages to your thinking at the time you’re making a purchasing decision, Markman says.
“For a marketer to make this strong association for you of paying with a credit card and buying luxury goods, what the marketer is doing is making it feel more fluent for you to make these kinds of luxury purchases with credit cards.”
Normally, in order to get that kind of an association, a consumer would have to use their own repeated experiences, but marketers are “giving you all of that experience without you having to do anything,” he says.
Marketers have this connection figured out, Chatterjee says. “Believe me, marketers know how credit cards influence behavior. We have to educate the consumer. As long as they pay an equal amount of attention to costs and benefits, that’s fine. If you are swayed only by benefits, you have to be careful.”
As credit cards continue to replace cash and checks, and mobile wallets emerge with even more ways to distance transactions from cost, consumers are faced with a cognitive burden every time they shop, Markman says, and they are essentially asked to keep track of costs in their head. Not everyone will have a problem with this, but people need to be aware of the challenge.
“It’s not that we can’t possibly manage that, it’s just more difficult to manage that,” he says.