Credit Cards Cost_ No Matter What

Are you a sucker? If you use a credit card to make purchases, Michelle Singletary — a columnist at the Washington Post — thinks you are. She bolsters her position by citing research from two MIT scholars whose research shows that people who use credit cards spend more than their counterparts who use cash. Singletary’s story was written last year, but it’s what I call an evergreen story. It’s as relevant now as it was when she first wrote it. From the story:I’m reasonably sure that many people do not make the same purchases when they pay with plastic. This isn’t just a feeling or anecdotal evidence. Researchers have found that people’s willingness to purchase more products or services increases with the use of plastic. In their groundbreaking research, Drazen Prelec and Duncan Simester of the Sloan School of Management at MIT found that study subjects paid more when instructed to use a credit card rather than cash. In fact, they found that people were willing to pay up to 100 percent more with plastic.So have I thrown a net too widely in arguing that we are all suckers, even those of us who faithfully pay off our bills every month?Nope. Net tossed just right. Because this is a pro-credit site, I am sure that there will be many readers who will say that the study isn’t applicable to them. They’re disciplined. They use their cards for the stuff they would have purchased with cash. As a result, they do not overspend. If that’s you, Singletary has a challenge for you:For one month, don’t use a credit card. Make all your purchases with cash. After the month is over, compare your spending with the previous month when you used credit.If it’s true that you don’t transact more when you use plastic, your spending behavior during the experimental month should be exactly the same.Without fail, when I have people do this experiment, they realize they, in fact, are buying more on plastic, even the folks who are capable of handling and paying off their purchases during the billing cycle. We’re going to give this a whirl at our house. We’ll continue to use credit cards for our cell phones and fixed costs like that, but we’re going to carry cash with us during the day — to see how our spending compares with our past credit-card spending. Should be interesting.