Paying with Cards Creates Craving to Spend More

calendar iconJun 20, 2021

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A recent study from the Massachusetts Institute of Technology (MIT) shows that using credit cards stimulates the brain’s reward system and makes people crave further spending.

The researchers behind Neural Mechanisms of Credit Card Spending used magnetic resonance imaging (MRI) scans to generate detailed images of brain activity in people when they were prompted to make a purchase using either cash or a credit card. Participants were shown a variety of products on a screen and invited to add them to a virtual shopping cart, then pay using either $50 in cash, or a credit card.

When people bought things using a credit card, the MRI showed the striatum—part of the brain’s reward system that releases dopamine, and plays a role in addiction—was activated. People were correspondingly more willing to buy expensive items, and spent more. With cash, the pattern of stimulation was weaker, and only associated with relatively low-cost items.

Evidence is accumulating that suggests credit cards take advantage of cognitive biases and other psychological mechanisms. Many, if not most consumers overestimate their future ability to repay, and are surprised by the high interest charges when these come due.
"Sachin Banker, Derek Dunfield, Alex Huang& Drazen PrelecMassachusetts Institute of Technology

The authors observe that, while a single experiment is unlikely to be definitive—especially concerning people’s behaviour in real world conditions—it does provide ‘clear clues’ about how brain activity differs depending on whether payments are made using cash or cards, and these neural mechanisms ‘may be implicated in credit card overspending.’

Based on their own work, and previous studies on the subject of different payment options, the authors suggest the brain’s reward network has been ‘chronically sensitised’ by prior experiences with credit card spending. This sensitisation might manifest when a person sees a credit card logo or ‘buy it now’ button, and their brain anticipates rewarding stimulation associated with an imminent purchasing decision.

The authors also highlight the great importance of understanding these mechanisms, since ‘they are not likely to be confined to credit cards only’ and any new payment technology has the potential to change spending patterns in ways people may not anticipate or want.

Such research once again illustrates the importance of retaining choice in the payments landscape, so that people can make a—hopefully informed—decision about which payment method suits their particular needs when buying goods and services. Cash is safe and tangible, and plays an irreplaceable role in ensuring everyone will have that freedom, both today and when weighed against payment options of the future.

Last Updated: Jun 20, 2021