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Home / Credit Cards / Are Your Credit Cards Making You Fat, Broke, And Stupid?

 

Credit Cards Making us Stupid?Researchers are always finding new things in our lives that are making us either fat, broke, or less intelligent. It is not surprising that there are a few things that are making us all of the above, but credit cards? Sure, it is easy to see how a credit card can lead some people into the kingdom of flat broke, but fat and stupid? Here are a few facts that will help you understand the tie in.

Just The Facts

  • An MIT study conducted in 2001 revealed that people with credit cards were willing to double the bids of cash only bidders at an auction. It is impossible to count all of the studies that have shown people are willing to pay more when using credit instead of cash. Is this proof of the broke or stupid point? Probably both.
  • A study conducted by Professor Dilip Soman of the University of Colorado found that paying with a credit card allowed people to forget how much they were spending. The cure to that is to track all of your spending and pay off credit card debt quickly. This re-associates your credit card spending with actual costs. This accounts for the stupid factor for sure. Well, financially stupid, at least.
  • A paper published in the Journal of Consumer Research in 2011 showed a correlation between the use of credit cards and splurging on fast food, sweet treats, and other unhealthy impulse items. There’s the fat factor.

Credit cards encourage people to buy things they could not otherwise afford. That is great for instant gratification, but it can trap a person in a never-ending cycle of debt that eventually lowers their available cash reserves. That means less cash is available for everyday needs. Additionally, credit card companies charge retailers to allow them to accept their credit cards. The retailers recoup these fees by raising their prices. Both of these points prove the broke claim.

Necessary Evil?

Credit cards are a necessary evil in that they allow easy access to credit for young people. This credit early in life allows you to build your credit score for financial needs such as car loans and mortgages. If used rarely and wisely, a credit card can be a good thing. The trouble is that our society is programmed to want new, more expensive things. Bowing to this programming(i.e. an ad for the latest smartphone) can lead to the overuse of your credit cards.

The key to the successful use of a credit card is to never buy anything that you can not pay for within three months. In most cases you should pay your balance before the end of the billing cycle, but there are occasions when life hits you unexpectedly. When that happens, fall back on the three month rule. Another helpful hint would be to never carry your credit card around. Put it away somewhere and only take it out of hiding when you have to use it, then put it away again.

 

About the author: Jerry Coffey

 

Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.

 

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