Do Credit Cards Really Make You Spend More Money?


There’s one topic in personal finance that can quickly divide the community: credit cards. Some experts are in the credit-cards-are-evil camp, while others are rewards junkies who espouse the many benefits of credit cards.

Avoiding credit cards can help you avoid debt, but make it harder to build your credit. Having a credit card can help you establish good credit and earn rewards, but also get you into debt trouble. Clearly, there are pros and cons to owning a credit card.

However, one of the biggest reasons experts recommend avoiding credit cards is the idea that they encourage you spend more than you would with cash. But is that really true?

Credit Card Spending Statistics: The Psychology of Plastic

The act of swiping a credit card is mindless: swipe, sign, and you’re done. Paying with cash, on the other hand, can be a little more painful. Physically departing with your hard-earned cash can be tough and make you think twice about your purchase.

According to Psychology Today, credit card spending also desensitizes you from the pain of spending and actually incites desire to consume. For instance, several experiments conducted in the 1980s by Richard Feinberg proved the correlation between credit cards stimuli and spending. The studies found that cues such as visible credit card logos incite a Pavlovian desire to spend.

An important 2001 study, “Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay,” conducted by Drazen Prelec and Duncan Simester of MIT’s Sloan School of Management found that participants were willing to pay almost twice as much on tickets to a Celtics game if paying with a credit card, compared to paying with cash.

It’s been proven people are willing to pay more when using a credit card. Credit cards, with the benefit of “buy now, pay later” and the lure of rewards can lead to overspending.

How to Keep Your Credit Card Spending in Check

So does this mean you should not have a credit card? It’s been show there are several disadvantages of using a debit card only, so that might not be the answer.

Whether you currently have a credit card or are thinking of getting one, there are a few ways you can keep your credit card spending under control:

  • Use your credit card only for fixed expenses. You can curb the temptation to overspend by using your credit card for recurring, fixed expenses like health insurance or Netflix. The prices will remain the same, so there’s no risk of spending more just because you are using a credit card.
  • Always check prices. This might seem obvious, but it’s important to always do a price comparison when paying with a credit card. I know I’ve been more meticulous about checking prices when I have cash on hand, rather than when I’m paying with a card, usually because I have a finite amount of cash on me. If you’re using a card, check your prices and don’t settle for convenience.
  • Stay within your budget. It’s easy to swipe away and not really think about how much you are spending until your payment is due. It’s important to stay within your budget and not succumb to overspending because you’re using a card. You can sync your credit cards and create a budget using a tool like
  • Make sure you have the cash for it. Paying with a credit card may be more convenient and offer more protections than paying with cash or a debit card, but you could easily pay for things that you technically can’t afford (yet). Always ask yourself, “Do I have the cash for this in my account right now?” If the answer is no, put the cards away.
  • Go on a cash diet. If you think you might spend more with credit cards, or if you want to test it out, resolve to pay with cash only for a month. After your diet is up, compare your spending from the previous month to the current month.

Studies have shown it’s psychologically easier to overspend with credit cards. That doesn’t mean that you should ditch credit cards completely — simply be more mindful when swiping.

Always ask yourself, “Could I pay for this in cash?” Pay off your balances in full each month to avoid interest and late charges. Credit cards can be a helpful financial tool as long as they’re used responsibly.

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