photo courtesy James Rintamaki
I often hear the excuse from people that they don’t have a credit card problem. They always pay their bills on time and never carry a balance. Besides, they get all those perks like airline miles, or cash back, or whatever else it may be. Personally, I prefer not to even support credit card companies by even having one in my possession. They still get paid every time you make a transaction at a store. I choose not to support their predatory tactics.
There are many studies that have been done that tend to shoot down those reasons for having a card altogether though. For instance, did you know that 75% of reward airline miles go unused? If I were a betting man, I’d consider those pretty good odds against.
Also, a study by Dunn and Bradstreet found that subjects spent 12-18% more when using plastic than they did with cash. Guess who wins in that case? Makes pretty good sense to install that credit card machine and pay that transaction fee doesn’t it? I’d sure pay a 2% transaction fee to get a 15% increase in income, wouldn’t you?
Have you noticed that most fast food restaurants now accept plastic? Do you think they did that just for the convenience of their customers? McDonalds was one of the last fast food restaurants to get on board with the trend. They did some research though and found that their average ticket went from about $4.75 up to $7.00 at the stores they installed the machines at! It didn’t take a lot of deliberation to make that decision after those kind of results. The only question was how quick can we get those installed in all of our stores!
Businesses are out there to make money, at least the ones that plan on sticking around. They do not provide their services as a convenience to us. You may be very disciplined in using your credit card and paying the balance off, but are you absolutely sure that you are not spending more than you would otherwise just to have this convenience?
Incidentally, these same studies apply to debit cards. I’m not against debit cards because they are tied directly to your bank account, but it does indicate that you should use those cards sparingly. Cash is still king. In fact, a Carnegie-Mellon study found that the brain registers spending cash in the same way it registers pain. That’s a good thing if you want to control your spending!