Studies Show Credit Cards Increase Spending

Multiple scientific studies have confirmed that customers will spend more when given the option to pay by credit card.

In one 2001 study a pair on MIT professors named Duncan Simester and Drazen Prelec ran an auction for Celtics tickets, requiring half of the participants to pay with cash and half with credit cards. On average, the credit card bidders were willing to pay DOUBLE!

Reward vs punishment?

Meanwhile, a Carnegie-Mellon and Stanford research pair took another approach. George Loewenstein and Brian Knuston offered students cash to spend and then studied the students’ brains. The structure of the experiment was simple. Show the student an item, wait a few seconds, then show them what it costs. They can decide to buy or pass. When the students stared at the object, their brain’s dopamine pathway or NAcc (nucleus accumbens) was triggered. When the price tag popped up, their prefontal cortex and insula lit up.

Do you know what else activates those two parts of the brain? Nicotine withdrawal. Pictures of people who are hurting. And, apparently, the idea of spending hard cash. Because the scientists could literally see which items caused more pleasure than pain, they knew when the subjects would (or wouldn’t) ‘click buy’ even before the students had consciously made the decision. Here’s the thing though: when customers pay for things using credit cards or mobile phone payment systems, it frequently soothes the brain into buying.

It turns out swiping an LCD screen or a piece of plastic counteracts aversion responses in the brain. The prefrontal cortex and insula aren’t triggered nearly as much as the NAcc. That and it’s much easier to access higher amounts. With phones, you can instantly transfer more cash from your account. All it takes is a click and a swipe. Similarly, credit cards reward you by spending, offering loyalty points and raising your credit limits. With cash, you’re restricted to what is currently in your purse or wallet. Otherwise, you have to go back to the ATM.

The power of abstraction

Many consumers prefer to use credit cards and phone apps to pay for goods and services. They feel it helps them manage their money better, because they have clear records. They can review card statements and bank balances at a glance. It lets them know exactly where every dollar went, and how it made them feel.

Our cards and phones often remind us of happy memories, so we have positive associations that make us more likely to use them, and that, in turn, can result in our spending more.

The Bottom Line

The lesson out of all this is very different for consumers and for business owners.  When you are a consumer, if you want to spend less, then consider paying cash in order to force yourself to feel the “pain of paying.”  But when you are running your business, you should definitely get a merchant account and make sure you give your customers the option of paying you with their credit card if you want them to spend more.

For more information on how accepting credit card increases your sales, or to sign up for a merchant account, please call (888) 924-2743 or go to


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