Do you want to have a healthier retirement? Then put away the credit cards. Does this sound crazy? Actually it’s not. As anchorman Ron Burgundy would say, it’s science. Don’t believe me? Read on.
My first reason for disliking credit cards is because of the fees collected from merchants by banks that issue credit cards. These fees make retail prices higher for everyone. The fees are made worse by the so-called “rewards” that are given to some card users (like us). The rewards represent a partial transfer of higher retail prices paid by all buyers to some card users. We would all be better off if there were no rewards cards and merchants could lower their prices by not paying card fees. Those rewards airline vouchers are not really free.
Another reason to dislike credit cards is the tendency to spend more with them. This tendency has been well-documented in several research studies. Because there is a time disconnect between the purchase and the pain of parting with your hard-earned money, even well-intentioned card holders will make more impulsive purchases and/or spend more on items if they pay with a card.
For more on this, here is an article I wrote on the fallacy of credit card reward programs.
The newest reason to dislike credit cards is they make you fat.
No, I am not making this up.
A recent article in the Journal of Consumer Research reported some interesting research findings. There is a connection between buying more unhealthy food and using plastic for the purchase.
First, the study authors reported this:
Examination of the grocery data showed that shoppers who paid with plastic spent far more and bought more junk and impulse items than customers who paid cash.
The authors looked into this further and concluded as follows:
When consumers encounter vice products — such as cookies, cakes, and pies — the emotive imagery and associated desire trigger impulsive purchase decisions. Pain of payment can curb the impulsive responses and thus reduce the purchase of such vice products.
Here is the link to the full article: Credit Cards Can Make You Fat
What is your reaction to this information? Would it change your shopping behavior or make you more aware of what you are purchasing?