Credit Cards Make Us Stupid
January 15th, 2010
The Real Problem with Credit Cards: The Cardholders : Interesting article about how humans mis-use credit cards. The concept of not parting with real money makes us act irrationally.
Once we’ve got our card in hand, our behavior becomes riddled with irrationalities. In one experiment, Drazen Prelec and Duncan Simester of the Massachusetts Institute of Technology found that people were willing to pay twice as much for basketball tickets when they were using a credit card as opposed to paying cash. Credit-card spending just doesn’t feel like real money.
[…] the typical consumer unnecessarily spends $200 a year in interest payments by keeping a sizable stash of cash in savings or checking while at the same time carrying a credit-card balance. In our heads, the two don’t line up.