Ulterior Motives

How goals, both seen and unseen, drive behavior

Credit Cards Make You Pay Attention to Benefits

Credit cards change the way you think about products.

Most people have had the experience that paying for something with a credit card seems less painful than paying for it with cash. In addition to this common experience, a number of studies have demonstrated that people are generally more willing to part with their money when paying with credit cards than with cash. They are also willing to pay more for a product when paying with a credit card than when paying with cash. 

There are many reasons for this difference. For example, it is just harder to keep track of how much you are spending when you are just dealing with numbers on a credit card than when you have actual cash. 

A paper by Promothesh Chatterjee and Randall Rose in the April 2012 issue of the Journal of Consumer Research suggests another reason. People pay more attention to the benefits of a product when paying with credit cards than with cash, but they pay more attention to the costs associated with the product when paying with cash than with credit cards.

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In one study, participants were first primed to think about credit cards or cash. This priming was done by having people use a set of words to form sentences. Some of those words were related either to credit cards (Visa) or to cash (ATM). 

Next, participants read about a digital camera. They were given information about benefits of the camera ("It has a 12x optical zoom") and costs ("Has a 2-year warranty that costs an additional $69.99."). They were asked how much they would be interested in paying to buy this camera. Later, they saw descriptions of possible features of a camera and were asked to remember whether those were actually properties they saw in the description. 

Consistent with the previous research, people who were primed to think about credit cards were willing to pay more for the camera than people who were primed to think about cash. In addition, the people who were primed to think about credit cards were more accurate at recognizing the benefits of a product than its costs. In contrast, the people primed to think about cash were (somewhat) more accurate recognizing the costs than the benefits. A second study found a similar pattern using a slightly different methodology. 

In a final study, participants had the chance to actually make choices. Again, they were primed to think about cash or credit cards. This time, though, they saw descriptions of two mp3 players.  One of them had better benefits than the other. The second had fewer costs than the first. People primed to think about credit cards selected the player with the better benefits about 75% of the time. People primed to think about cash selected the player with the lower costs about 75% of the time.

Putting all of this together, then, the form of payment you use to make a purchase affects how you evaluate the items. Credit cards lead you to focus on the benefits of a product. Cash leads you to focus on the costs.

What should you do?

When making any large purchase, you should think about whether you would be just as willing to buy the product if you were paying cash as if you were paying with credit. This can be particularly important for purchases like cars and electronics where salespeople like to add on expensive warranties. In the context of spending thousands of dollars on a purchase, a few extra hundred dollars may not feel like very much. It is worth thinking about all that you could do with those extra hundreds. Thinking about paying with cash may help you to do that.

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Art Markman, Ph.D., is a cognitive scientist at the University of Texas whose research spans a range of topics in the way people think.

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