Wednesday, July 18, 2007

Does a credit card make you purchase more?

Do you buy more with a credit card? I was listening to Dave Ramsey the other day and he read off a statistic that McDonald's found customers charging an average of 47% more per ticket when buying with a card vs cash. Other studies showed the figure around 30%. I'm sure its higher for fast food joints. When you are buying a $3 happy meal, it only takes a super-sized fry and an apple pie-thing (do they still sell those?) to knock it up another couple of dollars.

But are we spending more with the card, or are we just spending more per transaction?

I think it depends on the individual. I don't think I fit this statistic. If I have cash, honestly, I'm more likely to spend it. Maybe its a generational thing? My budget is all done electronically. My bank account is my "money". If I have a $10 bill in my wallet, that just feels like extra spending cash. I'm more likely to stop at a convenience store to buy a soda if I have a dollar. If my wallet just has the plastic in it, I'm more likely to just skip the transaction altogether. And when I do purchase on the card, I'm still looking at getting the best value to spend as little as possible. I know at the end of the week, I'll have to deduct whatever I spent from my paycheck. The idea of that hurts more than plunking down some green.

Plus all that change I get back? It goes into a jar. Where does the change in the jar go? 1) The vending machine at work, or 2) The change machine at the grocery store - which charges a percentage of the transaction.

For kicks, here's the article that prompted the discussion. Can credit cards make you fat? Sometimes mainstream media spins just crack me up.


Jim said...

It’s a fact that credit cards do make you purchase more. Even as little as a dollar you charge is a dollar you didn't have but used anyways. So using the credit card period you are purchasing more. I don't carry much cash on me because my wife and I use our debit cards to track things. It is much easier to see the breakdown of money as debit transactions than to keep receipts and break it down that way. Granted debit vs cash, when the cash is gone it’s gone and debit doesn't always do a hard stop.

My change used to go into vending machines but I'm on the "stop buying crap" diet so now it goes in a jar. The jar goes to the bank where they deposit it into our savings account and doesn't cost me anything.

Beyond the Consumer said...

You just take the jar to the bank and they accept it?

Actually, I haven't tried that. I remember my bank making me count and roll them all myself. But I haven't stepped in a bank since I opened my account years ago.