If you're basking in post-Black Friday fracas euphoria (despite blowing your budget on the first "official" holiday shopping day), I bet you paid with a credit card.
Consumers focus on the benefits of a purchase -- while ignoring the price tag -- when they pay by credit card, according to a new article by professors Promothesh Chatterjee and Randall L. Rose in the Journal of Consumer Research.
On the flip side, consumers who shell out cash tend to zero in on the downsides of a purchase, such as cost, warranty prices, installation costs and shipping costs. These consumers are more likely to buy a lesser product to save money, while cardholders are willing to spend more for a better product.
Makes you rethink your holiday shopping strategy, doesn't it?
Researchers have long pointed to the so-called "credit card premium," the premise that consumers will spend more with credit cards than with cash. It backs the theory that physically doling out dollar bills is financially painful, while swiping a card makes it harder to imagine the loss of money.
In fact, the same journal highlighted research this past summer that showed consumers were more likely to buy junk food if they were paying with plastic rather than cash.
Still, many of these studies don't take into account the extra perks some issuers provide their cardholders, namely rewards. And this holiday season, many credit card companies are amping up how much cardholders can earn.
Of course, rewards may be just another way to explain away a bigger-than-expected purchase. In the end, whether you pay with cash or credit, stick to a predetermined budget before hitting the mall.
How do you pay for your holiday purchases?
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