Our Brains and Spending

The Wall Street Journal recently ran an article highlighting a study on how shopping with credit cards affects our brains. Conducted by MIT, the study compared brain activity when shoppers planned to pay with a credit card versus paying with cash. The results indicated that people were more willing to purchase expensive items using credit cards compared to cash and were also willing to spend more if using credit cards.

It’s no secret that the biggest barrier to spending is having the funds to make certain purchases. Credit cards remove that barrier because payment is delayed. Consumers are no longer focused on how much cash they are carrying at that moment, and do not factor in the funds in their bank accounts or other upcoming expenses. This study also showed an increased sensation of pleasure and reward when shopping with a credit card. In short, credit cards actually encourage more spending.

Aside from the traditional rewards offered with most credit cards, the brain learns to anticipate the reward of being able to make purchases with delayed payment and immediately acquire something. This encourages additional spending. The researchers also believe that the brain can be encouraged using other sensory cues like the vibration of a cell phone when you pay with your phone. It is truly amazing how your brain can be trained. In the case of credit cards, your brain can be trained to spend beyond your means and incur significant debt that you are unable to repay.

One of the goals of the study was to get a better understanding of how our brains work to potentially preempt harmful spending patterns. Credit cards are an extremely convenient way to make purchases, especially when traveling. However, they’re also a trap that encourages poor spending habits. People often joke that they’re addicted to shopping or are shopaholics. The reality is repeated shopping trips with credit cards can train your brain to continue those habits. Shopping and spending become a craving, no different than a late-night ice cream craving.

Budgeting and saving is not easy and credit cards can easily trip you up. According to a recent study by Lending Tree, New Yorkers average $6,973 in credit card debt. Credit cards also carry some of the highest interest rates of all types of consumer debt. If you’re carrying a balance on your credit cards, that balance will quickly increase if you don’t take the right steps to address that debt. Zimmelman Law PLLC can help you create a budget that works and craft a plan to help you eliminate your debt.

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Zimmelman Law PLLC

With over twelve years of experience, Matthew D. Zimmelman, Esq. has helped thousands become debt-free and saved countless New Yorkers from losing their homes in foreclosure. Whether you are an individual or a small business, looking to file bankruptcy or looking to eliminate your debt without filing bankruptcy, we are here to help you get a fresh start.

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