The psychology of Credit Card Purchases

Credit Card Purchases Help Boost Self-Esteem

If you’re experiencing low self-esteem, there’s a good chance you’re vulnerable to spending more money and using your credit card to do so. At least that’s what researchers from Cornell University and the London School of Economics discovered in a study published in the journal of Social Psychological and Personal Science. They found that buying luxury items makes people feel better when they are down, and using credit cards protects people from the pain of parting with their cash.

The Study
The researchers, Niro Sivanathan of the London Business School and Nathan Pettit of Cornell University in New York, had participants complete a computer test. They then told half of them they had scored in the 12th percentile, which means they scored poorly on the test, or lower than 88% of test takers. The other half were told they had scored in the 88th percentile, meaning their performance was better than 88 percent of the test takers. In regards to making a purchase, those who performed poorly were much more likely to say they would use a credit card compared with the participants who performed well on the computer task.

The researchers then conducted a follow-up study which included 150 college students. They asked students to think about purchasing a pair of jeans. Again the students performed the computer test where half were told they performed poorly and half that they performed well. The researchers found that the students who were told they performed poorly were willing to pay nearly 30% more for designer jeans and were 60% more likely to use a credit card to make the purchase.

The Conclusion
Most of us know that shopping can be a great mood booster. It’s an easy way to instantly make ourselves feel better when we are down. But the researchers in this study were able to go into even further detail. The participants that were told they performed poorly on the computer task took a hit to their egos. Consequently, it was the luxury items and not everyday items they turned to in order to repair their self-esteem. Additionally, they were much more likely to pay for their purchases with plastic as opposed to cash. The researchers believe that it is psychologically difficult, even painful, for people to part with cash. By using plastic, people can boost their self-esteem and feel better without drawing attention to the actual amount of money they are parting with.

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