It has been known for decades that credit cards encourage spending. But Why that happened is still not entirely clear. New research offers new insights into the causes – and how consumers could be manipulated in an increasingly cashless society.
Research into credit card spending has resulted in delaying payment removing an obstacle to purchases in customers’ minds. A study published in Scientific Reports in February found evidence of a different type of trigger.
Differences in brain activity between shoppers looking to use a credit card and shoppers looking to buy with a cash suggest that buying on credit not only alleviates shoppers’ inhibitions but also actively encourages them to buy, the researchers say.
The bottom line: When people shop with credit cards and see a product they like, the neural network in the brain that creates a sense of reward grows larger, creating a desire to spend, says Sachin Banker, assistant professor at the University of Utah, who graduated as a Ph.D. Student at MIT Sloan School of Management.
“You basically feel more rewarded when you shop with credit cards,” he says. “We don’t see that with cash. It was actually a huge difference. “
The researchers used some form of magnetic resonance imaging to measure the subjects’ brain activity while they participated in a shopping exercise. Each participant was shown a total of 84 everyday products in three sessions and was asked if they would buy each product at the stated price. Half of the products were offered for purchase by credit card and a half for purchase with cash. None of the products cost more than $50.
The differences in shoppers’ brain activity support the hypothesis that after repeated credit card purchases, the brain learns over time to anticipate the rewards of credit card purchases, the report said. And that suggests that by using various sensory rewards in new payment systems, consumers might be conditioned to spend, says Dr. Banker.
For example, with digital payments, using certain sounds or vibrations on your smartphone for certain purchases but not others can teach your brain, over time, to anticipate rewards for purchasing certain products when you shop.
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Dr. Banker adds that more research could be done to see if the higher price study’s theories are true. It could also examine consumers who have a tendency to overuse or abuse credit cards to further understand why they are acting the way they do. This study focused on people who mostly paid on time and used credit cards appropriately. Understanding brain patterns for other types of consumers could lead to solutions that try to prevent harmful spending behaviors, says Dr. Banker.