Picture this: you are at the register preparing to pay for the food you have just ordered. The cashier asks for the preferred method of payment: cash or card. You probably think nothing of it because you will pay the same amount either way. This decision won’t impact your purchase or your usual spending habits, right? Well, you might be surprised to find out that the choice you have made speaks a lot about you as an individual and as a member of society.
Although most people are indifferent to this decision, studies have shown that closer attention should be paid when choosing between the two. Researchers have concluded that when people use credit cards they tend to spend significantly more money than when paying with cash. This phenomenon can be simply explained if we think about how the human brain works. Cash is a tangible piece of paper we carry in our wallets, as opposed to credit or debit cards, which are pieces of plastic we do not dispose of. If we were to purchase an item using cash, we would have to physically discard pieces of it. In this case, in our minds, we internalize that we have lost something that belonged to us. When we pay with a card, we don’t technically use real money as it is just a piece of plastic we hold onto, so it gives us the impression that we have more money than we actually do. On top of that, paying with cash takes notably longer than paying with a card. This is one of the reasons most people, who prefer to use cards, spend more money and often end up with crippling debt. When we physically have to get the money out of our wallet, we review our purchase and decide whether it is worth it or not.
Another factor that contributes to our spending habits is represented by the society we live in. The world economy relies on the production and consumption of goods ranging from food to appliances or cars. Excessive consumerism causes a plethora of irreversible climate changes, threatening the Earth’s well-being. To illustrate this claim, we have to analyze the concept of fast fashion. This uprising trend relies on the production of poorly made clothes by under-paid workers and in some cases, child labor. The public tends to prefer to buy fast fashion as it is cheaper and it embodies the latest trends. This becomes a never-ending cycle of buying and tossing clothes, which ultimately benefits clothing retailers but severely harms the planet.
Furthermore, extreme spending habits are preventing people from creating an emergency money fund. A survey reveals that nearly one in five Americans have no emergency savings. This claim seems utterly possible as the average American spends about $66,928 per year which seems absurd when the average annual income is $78,734, according to the Bureau of Labor Statistics. Considering stimulating marketing, cultural norms, and retail therapy, we can comprehend that our spending habits are primarily based on our emotions and thoughts.
In order to monitor our personal finances we have to be mindful of our
purchases and consider starting an emergency savings account. It is crucial that we understand our economic capability in order to not overspend on non-crucial items such as expensive jewelry or sports cars and wind up with unexpected debt.
The next time you purchase an item you are unsure of, ask yourself if you could afford to buy it twice. If the answer is no, you should reconsider your purchase.
Sources:
https://www.nerdwallet.com/article/credit-cards/credit-cards-make-you-spend-more
https://www.cnbc.com/2023/02/10/average-amount-of-money-americans-saved-in-2022.html
https://www.psychologytoday.com/us/blog/the-science-behind-behavior/201607/does-it-matter-
whether-you-pay-cash-or-credit-card
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