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Do Credit Cards Really Encourage Spending?



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There is a widespread theory that credit cards cause people to spend more. A lot of behavioral economists and sympathetic journalists have spent a lot of time speaking about this in conferences and the media.

The gold standard method for determining causality is a controlled experiment. Recently, two academics ran the only published field trial of which I am aware that randomly assigned credit card vs. cash purchase opportunities to people in a live commercial environment. Their conclusion: “Surprisingly, we find that credit cards do not increase spending.”

One non-replicated study doesn’t prove a whole lot. It’s also facile to generalize from this to a statement about credit cards across many situtations. But it sure is interesting to keep in mind when you listen to very plausible-sounding theories about “temporal separation of pleasure and paying” and “human cognitive bias” and whatnot.



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