True.93 you spend less with cash vs credit

According to the website, the average credit card debt in households that use credit cards is over $15,000, and there are over 500 million credit cards in circulation in the U.S. I knew that credit card debt was a problem for many people, but I didn’t realize just how big the problem was. If you own and use credit cards, you in all honesty can probably answer the question of whether you spend more money when using credit cards vs. using cash. My wife and I stopped using credit cards years ago. We never had a problem with carrying credit card debt, but we noticed that we spent roughly twenty to twenty-five percent more money when we made purchases with our credit cards vs. using cash. There have been a few research studies conducted on this topic, and most show that you indeed spend more money when you use credit cards, roughly eight to eighteen percent more. One early study was conducted by Elizabeth Hirschman (1979) and published in the Journal of Consumer Research. Dr. Hirschman hypothesized that consumers who only had bank- or store-issued cards would make larger total dollar purchases than those not possessing a card and that the average transaction with a card would be higher than transactions made with cash. The results of the study supported her hypotheses and showed that consumers did indeed spend more money and also made more purchases when using cards. One reason we might spend more money using credit cards is that it is much easier to make spontaneous purchases. Many years ago when my wife and I still had our credit cards, we were walking through a sporting goods store and happened past the firearms area. I’m still not sure how it happened, but in a matter of twenty minutes we purchased two firearms with the total bill being over a thousand dollars. We likely would not have made that purchase if we hadn’t had our credit cards in our wallets.


Hirschman, E. Differences in consumer purchase behavior by credit card payment system. Journal of Consumer Research (1979), Vol 6, pp. 58-66.