How Credit Cards Use Mind Control to Make You Spend More

This is a guest post from Alban. Alban is a personal finance writer, specialized in credit cards. He helps people to compare and choose the best credit cards for their needs.

We don’t like to think that someone else is controlling what we do, say and think but the reality is that we are all products of our environment and this is a fact which peddlers of consumer products and services are able to exploit in their marketing and advertising campaigns. Dependent on our upbringing, community and culture we all have certain behaviour patterns which can be triggered by appealing to universal needs, wants, desires, insecurities and fears and as a result it can appear that credit card companies are using mind control techniques to make you spend more when in reality they are simply triggering thoughts and feelings you already had, and offering you a way to fulfill those needs or quash those insecurities through a credit card purchase.

However it has been found that credit card providers are not only encouraging you to spend more on your card, but also in other aspects of your life with other financial products. While being aware of the marketing and promotional ploys used to encourage you to spend on your credit card may initially come as an unsettling revelation, you will have to delve deeper into your reasons for accumulating credit card and consumer debt to truly take back control.

The Mind Control Marketing of Credit Card Providers

There are many theories and studies surrounding the mind control and influencing techniques used by credit card providers to encourage you to spend. Some are more conclusive than others, so consider how the following findings and results correlate to your own credit card spending experiences:

• You are likely to spend more on credit, than using cash or debit. Visa themselves conducted a number of studies to prove that consumers will spend more when they are able to pay by credit, to convince merchants to accept credit card payments. A famous example is the decision by McDonald’s to accept credit cards which led to a higher average purchase by their customers. In fact average spending per customer is 30% higher when they are able to pay with a card.
• Your credit card separates you from the purchase. While credit cards and debit cards are almost interchangeable significant differences still exist in the way they are used as the increase in spending on plastic does not extend to debit cards, only credit cards. A debit card, like paying with cash, is easily tied in your mind to the funds in your own account. However when you pay with credit you are separated from the purchase and you are able to choose when, if ever, you pay for it.
• You can more easily recall cash and debit transactions. Because a cash or debit card transaction is associated with the funds immediately leaving your possession you can more easily recall the purchases you have made and account for those purchases for future budgeting. However when it comes to a credit card purchase you do not associate that purchase with your own funds until a statement arrives several weeks later.
• The credit limit is set so you must be able to afford it. Credit card users also put a lot of blind trusts in their credit card providers, rationalizing that if the banks have assigned them a credit limit it is based on their income and financial situation and so they assume they can easily repay any purchases up to the credit limit amount.
• Does the presence of your credit card trigger spending? A number of studies have been conducted to try and prove this fact but the results have not been definitive and if the presence of a Visa or MasterCard logo encouraged spending then it would encourage spending on a debit card as well but this is not the case. Similarly while MasterCard, Visa and American Express worked hard to promote their brands consumers do not necessarily associate these logos with spending, but it is the credit aspect of the card which encourages purchases.
• Is it the promise of what credit can buy? Credit card providers such as MasterCard and Visa are certainly banking on the fact that they can encourage you to spend by showing you all of the wonderful things you can buy, experience and have simply by using your credit card. The MasterCard Priceless series of advertisements is a telling example, and now that you know what you are looking for you can see exactly how the Willy Wonka candy store episode of the series for example plays to your desires, as the shelves of the candy store are filled with consumer products, embodying the message that MasterCard is the best way for you to realise your fantasies whatever they are.

Credit Card Spending Effects Extend Further

Unfortunately the overuse of credit cards does not just affect the user but also has wider implications for your financial situation and your financial security, and the web of financial distress can be spun even wider to encompass your other creditors and even consumer borrowing habits. When your credit card use increases:

• Wider financial distress ensues. The effects of credit card spending are more widespread than the effects on just those doing the spending. The children and spouses of credit card users are also affected as credit card debt is likely to be linked to a decline in mental and physical health which affects family and personal relationships. Also if you have a significant credit card debt and become financially stressed, your economic activity will decline as a result, having a follow-on effect for the entire economy as those who were previously spending up big on their cards are now too indebted to continue to do so. This also affects other creditors and if you are financially stressed due to the debt on one credit card your other creditors won’t be paid, in turn affecting their economic health and activity.
• Greater credit card use indicates greater borrowing. Where credit card use is more prevalent you are using your credit card more, and accumulating fewer savings, in Germany for example, they have one of the lowest rates of consumer borrowing among highly developed countries, they also have high savings and lower credit card use. Therefore you could expect to find a connection between greater credit card use and greater consumer borrowing.
• Increases in total debt are preceded by an increase in credit card use. Studies of credit card use and levels of consumer borrowing in Australia, Canada, Japan, the United Kingdom and the United States show that credit card use does not generally rise without being followed by an increase in total debt. These risers remain unaffected by employment and GDP, and show that an increase of $100 in per capita credit card spending is associated with an increase one year later of $105 in consumer spending.
• Credit card spending is not separate from credit card debt. In the above example credit card spending and credit card debt did not affect the figures independently. This suggests that not only are we being encouraged to spend on our credit cards, we are also not feeling any pressure to repay those purchases or minimize our debt.

While there are any number of factors which make it easier for us to dissociate with the purchases we make on our credit cards at the end of the day we remain responsible for the purchases we make and the spending habits we exhibit. Instead, being aware of how credit card companies play to our natural and inner inclinations can help ensure a heightened sense of financial responsibility when it comes to your credit card use, especially coupled with the understanding of the wider effects of credit card spending and debt.