New Study Shows Credit Cards Don't Increase Spending | CreditShout

New Study Shows Credit Cards Don’t Increase Spending

By Kevin / May 31, 2009
New Study Shows Credit Cards Don't Increase Spending

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Believe it or not, Carnegie Mellon University just completed a new study dispelling the belief that paying with credit cards causes consumers to spend more money than if they had used cash. For the most part, at least.

Two economists at the University–Elif Incekara Hafalir and George Loewenstein–found that there was also no major difference between the amount the two groups spend. They concluded that consumers paying with either just credit cards and those paying with just cash for purchases ended up with very similar results.

The study used over 400 individuals in the cafeteria of an insurance company. The two researchers determined that the people that paid with cash spent about $4.59 on average for lunch. Credit card users paid about $4.93 on average.

The study went a little deeper than it appears on the surface.

The researchers split the cash user group into two types: people that normally pay with cash but were given a credit card for the experiment and those that use credit cards often. This latter group–called convenience users–were found to spend more on average.

The study shows that people that don’t use credit cards often are not likely to spend more. However, those that use them often may spend more than they normally would once they become comfortable with the idea of using the credit card.

In 2008 a similar study was conducted by the American Psychological Association (APA). That study found that people spent more money when using a credit card as opposed to cash.

One of the researchers said this during the 2008 study: “The studies suggest that less transparent payment forms tend to be treated like [play] money and are hence more easily spent.”

This new study contradicts the APA research data.

This new research further proves the idea that credit cards aren’t the problem behind consumer spending. Rather, consumers need to be more responsible and understand the nature of a credit card before using it for every day purchases.

To read more about the Carnegie Mellon University study, go here.

The Impact of Credit Cards on Spending: A Field Experiment.

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