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Do You Spend More With Credit Cards?

Written by admin - 2 Comments

I’m sure that you’ve heard the statistics before… People who use credit cards spend more than those who use cash. The argument is that cash helps you to see and feel the money leaving your pocket, and thus it helps you reign in your spending.

While this makes perfect sense on the surface, where are the data to actually back this up? Debt reduction guru Dave Ramsey claims that people spend 12-18% more with credit cards than with cash, but doesn’t provide any data to back it up. There is also an oft-cited study by Dun & Bradstreet that makes similar claims, though I haven’t been able to locate it. The trouble here is that people citing this study variably claim a 10%, 15%, 12-18%, or even 64% (!!!) difference.

So what’s the truth?

I honestly have no idea. I’ve looked fairly extensively, and I still haven’t been able to find data to back up the various claims. That being said, my personal experience runs counter to the prevailing wisdom that credit cards = higher spending. Sure, if I was out and about without credit cards and didn’t have any cash in my pocket, I wouldn’t be able to spend anything.

But when I do have cash, I tend to be pretty free and easy with it. And if I wasn’t carrying credit cards, I’d be all the more likely to have cash in my pocket. Moreover, with the advent of debit cards, many consumers still don’t get that feeling of cash leaving their hands even if they avoid credit cards.

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Comments (scroll down to add your own):

  1. I don’t carry cash any more but I think that if I had cash I would be more likely to spend than with my cards.

    If I have cash then I can always stop in the vending machine and get a soda…not so with a credit card.

    I treat my credit card like a debit card because I only buy within my budget and send the payment off for the purchase within a week of buying something. There are a lot more opportunities to spend cash than there are to swipe a card.

    At work there are always have children asking me a for a quarter or someone is always selling cupcakes or greeting notes for 50 cents. My response of ‘I don’t carry cash’ has saved me from being constantly bombarded by requests for money.

    Credit cards rule..if you have the discipline to work with them responsibly.

    Comment by lulugal11 — Apr 2nd 2008 @ 3:40 pm
  2. Here is my experience:

    When my wife and I got married she began buying most if not all the groceries. She would go once or twice a week, buy what she wanted and put on the “card,” debit and credit.

    First I started looking back at the end of the month and looking at what we were spending on groceries, and honestly, it shocked me. So I made a deal with her, I asked her to use cash for two months and see what happened. If it was too much of an inconvenience or just wasn’t working we would forget the idea. So every two weeks I took out cash and gave her to spend on the groceries.

    The results: 14-29% less than when using the “card.” Consistently less every two weeks!
    I can’t explain it, but I can certainly see the evidence!

    Comment by Lance — Aug 19th 2008 @ 2:31 pm

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