Cash is king for bargain Christmas shopping

New research into shopping shows credit card use can affect our perception of money and how wisely we spend it.

Research by a pair of University of Kansas professors provides some fascinating insights into consumer behavior and marketing techniques - insight into which could help shoppers when they hit stores for Christmas shopping over the coming weeks.

According to Promothesh Catterjee, an assistant professor of marketing with the School of Business, shoppers who use cash view their purchases differently than those who use credit cards.

Shoppers who use credit cards tend to focus more on the benefits of the items they have purchased such as the great picture on a new TV or the fabric quality of a new shirt, while conversely, shoppers who pay cash focus more on a products costs - things like price, delivery time, warranty costs and installation fees.

"When it comes to product evaluation, beauty lies in the eyes of the cardholder," says Chatterjee. "People who pay with credit cards focus on the benefits and cool features of a new product while consumers who use cash focus on the price and other costs."

Previous research has repeatedly shown that consumers are willing to pay more when they use credit cards instead of cash, but consumer perception of products is new territory.

For consumers the research demonstrates that marketers - by constantly reinforcing the use and convenience of credit cards - may be affecting not only the amount of money we spend but also the types of goods and services we buy.

"Paying with credit cards may increase the likelihood of indulgent choices that are less healthy compared to cash," Chatterjee explained. "It's also possible that consumers primed with credit cards may choose more high image products among substitutes and more frequently include brands linked to benefits."

Although credit card holders are more likely to make reckless or indulgent purchasing decisions, compared to cash carriers who can physically experience their dwindling budget, the situation can be managed if a way can be found to "reintroduce some pain" at the point of sale.

"If we can put that pain back in, we could perhaps retain the convenience of plastic but at the same time help shoppers make more informed decisions," he said.

"Perhaps a simple reminder at the point of sale, like an image of cash or a reminder of a bank account balance could tip the scales back in consumers favour but for now, the take home message it to be careful when paying with credit cards this Christmas."

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