A great one from the Journal of Consumer Research

As you can probably tell from my lack of posts yesterday, I'm not yet fully recovered from my trip back from Italy. I fell asleep at my desk about five times yesterday, and I'm still pretty out of it. But I came across this study from the Journal of Consumer Research, and the abstract alone was intriguing enough for me to write a post about it. Essentially, the researchers conclude that credit cards make you fat (though they use bigger and more confusing words...how I miss academia). Emphasis is mine.

Some food items that are commonly considered unhealthy also tend to elicit impulsive responses. The pain of paying in cash can curb impulsive urges to purchase such unhealthy food products. Credit card payments, in contrast, are relatively painless and weaken impulse control. Consequently, consumers are more likely to buy unhealthy food products when they pay by credit card than when they pay in cash. Results from four studies support these hypotheses. Analysis of actual shopping behavior of 1,000 households over a period of 6 months revealed that shopping baskets have a larger proportion of food items rated as impulsive and unhealthy when shoppers use credit or debit cards to pay for the purchases (study 1). Follow-up experiments (studies 2–4) show that the vice-regulation effect of cash payments is mediated by pain of payment and moderated by chronic sensitivity to pain of payment.

I wonder further if our shift from a cash-based economy to a credit (or debit)-based economy has further increased the amount of impulse buying across all categories. It's a lot easier to throw down a credit card and sign on a dotted line than it is to go to the bank, withdraw cash, and then physically hand over the bills. This dynamic is especially acute on larger purchases, where we'd certainly think a little longer before handing over $500 for a handbag (for example) if we had to do in hard currency.

Even if we are living within our means (and many who use credit cards are not, which is a whole separate issue), it seems that the increased use of plastic has meant worse consumer choices. We are more likely to spend conspicuously, to make large purchases, and apparently to buy junk food with cards than with cash. Obviously the increased use of credit (and fractional reserve banking) has enabled the growth of our economy that we now hold dear, but I wonder if some of the unintended consequences of credit are worse than we might appreciate. Strange unintended consequences like this one are particularly troubling.


[Journal of Consumer Research]
(h/t Naked Capitalism)