A Game of Cards

A Game of Cards

Wednesday, March 13, 2019

Mileage Plus, Double points, Saphire, REDcard….if you recognize any of these names it is likely because you have some of the same cards in your wallet as I do.  As my husband and I discussed our financial goals for 2019, we once again discussed the desire to have a better handle on how and where we spend our money each month. We have set budgets before but ‘things’ kept popping up. A statement from TARGET, or GAP, VISA, or some other card would be lurking in the background and disrupt our budgets. So, in an effort to get our arms around truly seeing where our money goes each month, we decided to swing the pendulum to the other end of the spectrum of our spending habits and use only our debit card, checks, and cash starting January 1st.

This sounds simple and yet, for me this is a BIG step. You see, I have played the points game my entire adult life. I would sign up for a card with airline points and get baggage fees waived and save points for a trip and then I would cancel it and get a different airline card the next year to maximize the benefits (or that is what I have been telling myself anyways). I would get a store card and tell myself the 5-10% it was ‘saving me’ each time I went in was so worth it. And yet the more I researched this, the more enlightened I was that this may not be the case.

According to ValuePenguin, consumers spend up to 83% more on transactions when they use credit cards vs. cash.  Consumers have a subconscious willingness to pay more when using this payment method. This phenomenon is called a ‘credit card premium.’ When we don’t see the money disappear from our accounts immediately makes it feel less painful when we spend it. Therefore, the more ‘painful’ we make each transaction, the less likely we are to spend it. For example, as I’m digging in my wallet to pay for something and counting the bills and change, I see it physically leaving my wallet and hands and disappearing. I know that when it is gone, I will have to find more cash to replace it and that requires a trip to an ATM or bank which adds another step.

Additionally, there has been evidence that shows when consumers use credit cards, we tend to focus more on the product's benefits than its costs. Credit card users were 28% better at recalling aspects related to a product's benefits than cash users. Conversely, cash users were 82% better at recalling aspects related to an item's cost than credit card users.

When a store gives us a card, we get additional ‘perks.’ When I had a Macy’s card, I would get special discount days to go in and get a percentage off my purchase for being a card member. And you know what? I would go in and spend money there when the truth likely was that I wouldn’t have gone in to Macy’s that month at all!

I first learned of the benefits using cash and debit cards while listening to the ‘Dave Ramsey Show,’ a radio channel and podcast that offers tips and tricks to live a common sense, debt-free life.  He gives great financial advice on spending money and paying off debts. And because of that, I feel his mission and ours at the bank are quite similar. We are both trying to assist our customers in building and maintaining wealth. He is a great resource aligned with our bank’s values on developing healthy money habits.

I have a hypothesis of what is going to happen in the coming months in terms of our spending and psychology of how we treat money but I will save these findings to share in the next quarter’s newsletter. In the meantime, if you feel like joining me on this experiment, feel free to email me at: abbyjbruning@gmail.com and tell me how it’s going for you or share your challenges in this journey.  Wish me luck as I go through my card withdraws!

- Abby Bruning