Knowledge nest.

published November 28, 2019
ByAudrey N
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The Psychology Behind Credit Card Spending

Why does shopping feel so good? Science shows that when we do things that bring us pleasure – like indulging in a choc-mousse or buying something new – our bodies produce greater amounts of dopamine. Dopamine is known as the ‘feel-good neurotransmitter’ which activates the pleasure centers of the brain. Credit cards can be especially dangerous and dopamine-inducing because they disconnect the pleasure of buying from the pain of paying. 

Here are a few interesting findings from psychologists around the world.

How else does the mind impact how we use our cards? 


Finding #1: Giving away cash hurts more than tapping a credit card. 

Researcher: George Loewenstein, 1998 and 2001

Loewenstein was interested in determining how emotions factor into spending habits. He looked at a range of spending scenarios, including whether people feel pain or pleasure when shopping. One key finding was that consumers experience psychological pain when parting with cash compared to other payment methods¹. When using a credit card, people tend to create a mental buffer between buying the product and losing their money, which Loewenstein calls ‘de-coupling’.

So the next time you’re going shopping and want to exercise self-control, try to use cash and see if that impacts what you choose to buy.


Finding #2: We view objects as part of our self-identity.

Researcher: Kyungmi Kim and Marcia Johnson, 2010

According to an article in The Psychologist², research suggests that humans tend to view objects as part of their self-identity. Kyungmi Kim and Marcia Johnson conducted an experiment in 2010 where they asked participants to react to objects that were marked as ‘mine’ and objects that were marked with someone else’s name. After scanning participants’ brains, extra activity was observed in the medial prefrontal cortex (MPC) in response to the sight of ‘owned’ items, compared with control items allocated to others. The MPC is a midline frontal region of the brain typically associated with self-processing and other-processing. The same area of MPC was activated when participants rated how much various adjectives described their own personality. “Areas of the brain that are known to be involved in thinking about the self also appear to be involved when we create associations between external things and ourselves through ownership,” said Kim.

This shows us that material items are important to our self-expression and can explain the motivation behind spending and mounting credit card debt.


Finding #3: Credit limits may be easier to recall than your bank account balance.

Researcher: Carey Morewedge

Do you know what your savings account balance is at? Probably not. (If you do, I’ve gotta say I’m impressed.) What about your credit card limit? How could you forget. Carey Morewedge raised this point and also suggested that credit limits can make purchases appear smaller than they are. For example, a $4 coffee may seem less expensive when you’re buying it with a $10,000 credit card. Whereas, it feels pretty substantial when you use a $5 bill and it disappears.

This is a reminder to us all that we need to remember to value goods for what they are – and not in relation to how we’re paying for them. Being mindful of biases may help curb overspending.


Finding #4: We’re more likely to eat unhealthy when using a credit card.

Researcher: Manoj Thomas, Kalpesh Kaushik Desai and Satheeshkumar Seenivasan, 2010

Research done in 2010 sought to determine if credit card payments were linked to unhealthy food purchases. Turns out it is. By examining shopping behaviour of 1,000 households over six months, researchers found that people purchased more unhealthy food options when spending with a credit or debit card. Participants were found to spend 56% more on impulse products when they used a card rather than cash3. The conclusion of the study was that cards are linked to weakened impulse control even among people who were normally very careful with their money.

If you’re trying to eat healthier and save money, hitting the shops with a credit card could be a tempting situation. Go in with a list of what you need and get out! Stay strong. 

Can you relate to any of these findings? Find out your credit score to assess how good you’ve been with your spending habits.






DISCLAIMER: This article contains general information only, and is not general advice or personal advice. Wisr Services Pty Ltd does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.
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