Credit cards are much in the news these days. Consumer debt is high, and many people have been forced to declare personal bankruptcy to get away from high-interest credit card loans. Lawmakers are working to tighten the rules on credit cards to protect people from themselves.

There are many reasons people rack up consumer debt, of course. But as I was reading yet another story about the proposed regulations on credit cards, I started thinking about the role of impulsivity in consumer spending, and how credit cards may help feed that process.

Last post, I focused on the relationship between speed of thinking and happiness. But what influence does this fast thinking have on the behavior that results from thinking fast?

Studies of decision making often use N-arm bandit tasks to study choice. I have mentioned these tasks before in this blog. In an N-arm bandit study, there are four options (like arms on a slot machine). Each option is associated with some average payoff, and the payoffs of each of the options varies over time. At first, you have to explore all of the options to know which one is best. After that, you can decide to focus on the option that currently gives you the best payoff (to exploit that choice) or to select an option that has given worse payoffs in the past (to explore the environment).

In this kind of study, when people think slowly or are forced to make choices at a slow pace, they tend to focus on the option that is currently giving the best choices. When they think quickly or have to respond quickly, they are much more likely to pick an option that is currently giving a worse outcome, perhaps in the hope that the option will improve. That is, fast thinking increases the chance that someone will be affected by factors other than selecting the action that is most likely to be valuable in the long-run. That is the hallmark characteristic of impulsivity.

Credit cards make it easier for people to think and act quickly in purchase settings. With a credit card, you can create one-click shopping on websites. You can dial the 800 number on an informercial and be the proud owner of a ShamWow!, Snuggie, or the latest Ronco device. Other methods of payment require more work. Using cash means having to go to the bank and have cash on hand. Writing a check is effortful, and many stores require an elaborate process of validation for each check you write. Both of these methods slow down purchases.

Finally, to connect back to the previous post, thinking and acting fast tends to elevate mood. So, you are reinforced for fast purchases by feeling good as you do it. That makes it easier to continue making credit-card purchases that are not in your long-term interests. Ultimately, your mood will not be so positive when you are saddled with high credit card balances.

So, even though fast thinking can make you happy in the moment, sometimes it is worth sacrificing a little happiness in the present for a more relaxed future. When you have a credit card in hand, slow down, count to 10, and think a little more slowly before making the next purchase.

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