Cash, Credit Cards, and Smart Shopping

Wednesday, April 25, 2012, 2:00 AM | Leave Comment

Wise consumers know how to choose a quality product. You look at all of the options available, and choose the one that suits your needs. Rather than rushing out to buy it right then, you wait until you can afford it and maybe even wait until it’s on sale.

Unfortunately, many of our purchases don’t really fall into this category. We buy things on a whim, taking advantage of the instant gratification that credit cards provide. This isn’t bad in itself; there’s nothing wrong with a little bit of indulgence every now and again.

The problem comes when a consumer uses a credit card to make a purchase that isn’t right for him, or chooses a product that’s more than he can afford.

As it turns out, your choice of payment method – whether you choose to use cash or a credit card – may actually impact the product you wind up buying.

Professor Chatterjee at the University of Kansas and Professor Rose at the University of South Carolina have recently published a study that looks at this exact phenomenon.

Here are some of the results included in the study:

  • Credit card customers are more likely to choose high-image products than cash customers.

  • Credit card customers tend to make more indulgent choices than cash customers.

  • Credit card customers are more likely to focus on benefit-related words, rather than on cost-related words.

  • Consumers who experienced credit card triggers – such as credit card advertisements, credit card stickers on the door, or a credit card sign at the cash register – were more likely to use credit cards.

  • Credit card purchases decouple the payment for something from its consumption.

  • Cash leaves a more vivid trace in the memory, largely because it visibly shrinks as it is spent.

  • Credit card customers were more likely to have recall errors in terms of cost.

  • Cash customers were more focused on price and cost-related issues.

  • Cash customers were more likely to inquire about and recall information regarding delivery cost, installation costs, warranty cost, and even delivery time.

  • When credit cards are more accessible as a payment option, customers are more likely to look at benefit-related product information.

  • Cash payment options that are in a credit card-like format (such as gift cards) tended to operate much in the same way that credit cards did.

  • Using credit cards actually reduces the consumer’s attention to cost aspects of a product.

This research is thoroughly interesting. Basically, it tells us that the method of payment we choose can, to a large degree, impact what products we buy.

If you’re concerned about getting the best possible product out there at the expense of price, you’ll probably make that decision using a credit card.

If, on the other hand, you’re more concerned about the cost of a given item, cash really is the way to go if possible.

In some ways, consumers can use this information to help shape their own buying habits. When it comes time to make a purchase, make the quality vs. cost decision ahead of time, and then choose the payment method that most favors that choice.

Author BIO

David Rodwell is an experienced writer who covers everything from business to personal finance. Check out his site for similar articles!

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