A new study in the Journal of Consumer Research shows that using a credit card induces euphoria.
Like a starry-eyed new lover who ignores the downsides of an obviously incompatible but very attractive partner, consumers who swipe plastic when they buy are often blinded to the true costs of their purchases. They even tend to exaggerate the perceived benefits of whatever they’re buying, according to research by Promothesh Chatterjee of the University of Kansas and Randall L. Rose or University of South Carolina.
This research actually goes well beyond what we’ve known previously about the impact of credit card use on consumer behavior. The old information — that consumers tend to spend 15%-30% more when paying with plastic — was bad enough. It turns out that our actual perceptions of products is different when we’re paying with a credit card. Sounds crazy, but here’s the research.
Researchers primed subjects using traditional behavioral study methods, such as making them play words games which focused their attention either on credit cards or on cash. Then they gave the consumers information on items they could theoretically buy, such as a notebook computer or an iPhone. Repeatedly, consumers “primed” to think about credit cards had a harder time recalling products’ price or other downsides.
“Our findings suggest that marketers may be affecting not just the amount of money consumers are willing to spend but also the nature of the goods and services that find their way into consumers’ market baskets,” the report says.
…the economist Emek Basker has found that in the US, where the Christmas shopping season varies between 26 and 32 days depending on the date of Thanksgiving, longer seasons mean more overall spending (about $8 per person per extra day).
I just read today’s Sunday paper, and it sparked more discussion than usual in my family. The myths, exaggerations, misconceptions, and misuse of statistics is infuriating and serves nobody well (except perhaps “the media” itself, though only in the short term).
I ran across this illustrative post last week. What does it really mean to be poor in America?
Understanding Poverty in the United States: Poverty USA
Today, the Census Bureau released its annual poverty report, which declared that a record 46.2 million persons, or roughly one in seven Americans, were poor in 2010. The numbers were up sharply from the previous year’s total of 43.6 million. Although the current recession has increased the numbers of the poor, high levels of poverty predate the recession. In most years for the past two decades, the Census Bureau has declared that at least 35 million Americans lived in poverty.
However, understanding poverty in America requires looking behind these numbers at the actual living conditions of the individuals the government deems to be poor. For most Americans, the word “poverty” suggests near destitution: an inability to provide nutritious food, clothing, and reasonable shelter for one’s family. However, only a small number of the 46 million persons classified as “poor” by the Census Bureau fit that description. While real material hardship certainly does occur, it is limited in scope and severity.
So, “poverty” suggests near destitution (and certain groups are getting as much political and alarmist mileage as possible out of that suggestion), but what does it really mean? Click through the article to see.
What really gets my goat is when “they” take a statistic (1 in 15 Americans) and illustrate it with an outlying example, then trumpet about as if the entire named group is comprised of people just like the example. The “I am the 99%” photos going around Facebook are a good example. Most of them are NOT the 99% – they are the most unfortunate 0.05% of the 99%. They are part of the 99%, but certainly are not the most accurate characterization of that group.
They mention one of Dan Ariely’s findings (from Predictably Irrational) – when Amazon introduced FREE shipping, sales skyrocketed everywhere except France. It turns out that the French division offered 1 Franc ($.20) shipping instead of FREE. Apparently, skipping the Franc expense was worth buckets of money to consumers.
There is no question that things exact costs from us, even when they are FREE – we have to store them, insure them, clean and maintain them, perhaps even use them (so we won’t have wasted our money). Try calculating the cost of the storage space in your home and compare it to the value of the stuff you have in it.