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Studies done through Citi Group, Dunn & Bradstreet and other places indicate that people spend more money when they use credit cards than when they use cash. Mobile payments using NFC (Near Field Communications) technology will now make spending money even easier. Consumers won’t even have to carry a credit card; just swipe your iPhone or Android-based phone in front of the special payment terminal and go. The purchase automatically goes on your credit card.
Many people say that mobile payments are a bad idea for the economy — and for individuals — because they will encourage more credit card spending and deeper debt.
I can’t argue the fact that some people may spend more because it will be “too easy.” I also agree that paying with plastic creates a detachment from your purchases that can cause some people to overspend.
But I cannot agree with those who want to “blame” the technology for consumer overspending. At some point, people need to take responsibility for their own spending. Taking responsibility for your actions is the first step toward getting out of debt.
Anyone who has a credit card (or uses their mobile phone linked to their credit card to make purchases) should have the mental capacity to understand that swiping your card equals spending money. You will have to pay that amount, sooner or later, whether it comes directly out of your debit account today or you pay it back (with interest) over the next 10 years. Remaining mindful of this fact every time you make a purchase can help considerably. Also, recognize that whether you use paper money, a credit card or your mobile phone to purchase the merchandise, it represents the same thing. You need to pay that amount.
When you pay with a credit card that carries a balance, you will pay more, over time, for that purchase. Is it worth paying 27.99% interest to take advantage of a 10% off sale? Remember this at the register and you won’t be as quick to reach for your credit card (or your smartphone) if you don’t have cash.
Technology provides ways for us to stay even more in touch with our finances. Here are some budgeting tools I find helpful to keep my spending in check, regardless of the means I use to make purchases.
I check my balances every day. I know, in my head, how much I have in my account, but seeing it on a screen makes a big psychological difference. If you’re tempted to make a purchase that you know you can’t afford, log in to your bank account online through your smartphone. Do it right at the register. In today’s technology-oriented society, seeing that number on the screen can provide that same “tangible” feeling of spending money as looking at an empty wallet or handing over cash to the sales clerk.
If you’re tempted to make a credit card purchase, do the same thing. Imagine how your credit card balance will go up, and the feeling you’ll get from seeing that number rise, if you make this purchase. Do you really need what you’re buying?
On the other hand, when we log in to our mobile banking or credit card accounts every day and see how savings account balance rise as our credit card balances go down, it creates positive feelings that can help keep us from spending money.
It’s helpful to watch your bank account balances grow (or wither away, as the case may be). But it’s even more helpful to know exactly where that money is going. Budgeting tools like Mint.com, directly tied to your checking and credit card accounts, make this easy, too.
Mint.com offers free apps for most smartphones, so, again, you can log in and track your spending prior to making an impulse purchase.
If you’re considering using a credit card with a balance to make a purchase just to take advantage of a sale or a great deal, log in to a credit card calculator that tells you exactly how much your purchase will cost. over time You can enter your specific interest rate and the monthly payment of your choice. You can enter a specific purchase amount rather than your total credit card balance; the number will be extremely revealing and can help you decide if your purchase is really worth that amount of money, especially for big-ticket items.
Of course, this doesn’t take into account that money you’re spending on items now is money you can’t put toward paying off your debt. Or the emotional “clutter” you add to your space when you fill it with items you don’t need. Or the emotional affects of feeling burdened by a lot of debt.
Considering all these factors, and inspiring yourself by using technology to watch your credit card balances drop, can really help you keep your wallet (or your smartphone, as the case may be) in your pocket next time you go to the mall.
Readers: What techniques do you use to keep from making impulse purchases?