Why Having a Rewards Card Makes You More Likely to Spend

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There have been many studies and clinical trials that set out to prove or disprove that having a credit card increases the occurrence of spending money. Over the many years that this particular question has been combed over, the same answer is extracted almost every time: yes, people do spend more money when they have a credit card.

The question that we derive from there is why? Why do people feel more inclined to spend more when they have that little plastic rectangle in their wallets as compared to loose cash or even a debit card? The answer has two prongs:

1.) a delayed payment as a result of the credit card, and

2.) the sweet, sweet smell of those rewards.

Here is a closer look at why we love swiping the plastic, and why we should all be a little warier about being so focused on those rewards points.

Our love affair with the modern credit card.

With the verdicts from the earlier studies coming out the way that they did, it sounds pretty relatable doesn’t it? We all feel a little better using our credit cards instead of the debit.

When you go to the grocery store and are waiting for your turn to exchange awkward pleasantries with the person behind the counter, and you spy that king size KitKat bar on the shelf, you are faced with a quick choice –should you go ahead and splurge for it? You don’t need it, but you kinda want it.

According the studies that were done, if you only have cash you more than likely will pass on the opportunity to indulge your sweet tooth, but when the checkout person asks you if there is anything else you would like to include and you only have your credit card on you, you are much more likely to lean over and snatch up that chocolatey crunch stick before leaving.

So why does this happen, and if you are like me, keep happening? The answer is that in our minds, credit cards are not real money. At least, not as real as the money attached to our debit cards, or even cash.

The New York Times refers to this mentality as the “Credit Card Premium”, and it goes to the reasoning behind why we prefer to reach for credit card instead of methods of payment that subtract an instant total from our accounts: it feels like we are delaying the payment indefinitely, even though in reality we are putting off the payment for only about a month or so.

We prefer the idea of not having to think about the money leaving our account instantly versus having our money drained after a lengthy delay. One of the deeper reasons that we tell ourselves that this is an alright way of thinking — security.

“Credit cards are much safer than using my debit card!”

With credit cards come with a sizable amount of security and peace of mind.

If by some odd chance we come across a situation that while using our debit card someone snagged our account info, they could make all kinds of wild and extravagant purchases with our accounts before we even notice that we had our identity stolen, and that could wreak all kinds of havoc within our financial holdings. With a credit card however, we have that comforting feeling of a “safety net” that if something goes wrong, we can deny the purchases and walk away from the situation unscathed.

This mentality of credit card = safety and debit = bad isn’t always a wrong way of thinking, but being 100% responsible with credit cards is not always possible 100% of the time. When we let the false freedom of credit cards get the better of us, it can actually be more dangerous that having your account info stolen from you. In other words, when it comes to the plastic, you are your worst enemy. 

Reaping the rewards.

The reason that we love credit cards so much and never shy away from the opportunity to stick our rectangles in that painfully slow chip reader is the rewards.

It’s pretty insane when you think about it –we are essentially getting paid to spend money. Rewards points, when used carefully and acquired strategically can be a huge life help and financial boost, as it can lead to cheaper airline miles that otherwise would cost you an arm and a leg, cash back that can cover a fancy night out for you and the Mrs., or even just “thank you” bonus’s like first dibs on concert tickets that otherwise are unavailable to others. All this just because you like to spend money so much that you decided you should be payed to do it.

These rewards can be insanely awesome, but when we get nothing but rewards points on the mind, that is when we can find ourselves in some pretty hot water that we never thought we would get into otherwise. Having a credit card that gives you an insane rewards points ratio is a great way to enhance your life, but it can also be a dangerous way to push you into overspending without you even noticing.

It may sound simple and amateurish, but you always need to keep track of everything that you purchase, and if you are swiping your card just so that you can earn some rewards points, then you might want to reconsider what is more valuable: saving a few bucks on an airline ticket through your rewards program, or the money you just wasted on a gas grill from Patio World just so that you could earn a few points?

A ridiculous example, I know. But if you aren’t paying attention, you can run around town just looking for ways to rack in more rewards points and completely forget that rewards points are just “thank you’s” for spending your money with a particular credit company. If you aren’t careful, you just might find yourself at Patio World making more and more unnecessary purchases (Nothing against Patio World, really, they just came to mind as an example).

Don’t get wrapped up in the rewards hype.

Don’t get carried away by the glitz and the glamour of credit card rewards. They can be amazing, absolutely, but when we lock our sights on them, things can get pretty crazy.

Remember: credit cards are connected to your own accounts and run off of your own money, which is limited, regardless of how much time there is between you and your bill cycle.

Stay grounded on that fact and you should be alright, and when it comes to earning those rewards points –earn them as you go about your purchases at a normal pace. Don’t go out of your way to earn a few more rewards points if it means that you need to buy something you wouldn’t normally.

The savings earned from rewards points are not going to be equal to that gas grill you just bought, and they never will be.

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