Neural mechanisms of credit card spending

Abstract

Credit cards have often been blamed for consumer overspending and for the growth in household debt. Indeed, laboratory studies of purchase behavior have shown that credit cards can facilitate spending in ways that are difficult to justify on purely financial grounds. However, the psychological mechanisms behind this spending facilitation effect remain conjectural. A leading hypothesis is that credit cards reduce the pain of payment and so ‘release the brakes’ that hold expenditures in check. Alternatively, credit cards could provide a ‘step on the gas,’ increasing motivation to spend. Here we present the first evidence of differences in brain activation in the presence of real credit and cash purchase opportunities. In an fMRI shopping task, participants purchased items tailored to their interests, either by using a personal credit card or their own cash. Credit card purchases were associated with strong activation in the striatum, which coincided with onset of the credit card cue and was not related to product price. In contrast, reward network activation weakly predicted cash purchases, and only among relatively cheaper items. The presence of reward network activation differences highlights the potential neural impact of novel payment instruments in stimulating spending—these fundamental reward mechanisms could be exploited by new payment methods as we transition to a purely cashless society.

A scoping review of experimental manipulations examining the impact of monetary format on gambling behaviour

“…We found no studies testing contemporary options such as banking cards or other digital payment options in the context of gambling behaviour (c.f. Banker et al, 2021;Ceravolo et al, 2019)). Filling this knowledge gap will be critical to inform ongoing decisions in many jurisdictions (e.g., Gainsbury & Blaszczynski, 2020;GREO et al, 2020).…”

“…A shift towards cashless technologies could increase gambling harms for a number of distinct reasons. Within consumer psychology, research has documented increased spending when customers use cardbased payment methods compared to paying with cash (Banker et al, 2021;Prelec & Simester, 2001;Soman, 2003.). This 'plastic trap' (Pettit & Sivanathan, 2011) is particularly observed for indulgent or spontaneous purchases (Thomas et al, 2011) of which gambling could be an example.…”

Pleasure of paying when using mobile payment: Evidence from EEG studies

“…The study followed an identical setting as in study 1. Eprime 2.0 (Psychology Software Tools, Pittsburgh, PA, United States) was used to present a revised SHOP paradigm (Knutson et al, 2007(Knutson et al, , 2008Karmarkar et al, 2014;Banker et al, 2021) employed with a 2 (product categories: utilitarian vs. hedonic) by 2 (payment methods: mobile vs. cash) within-subject design.…”

“…A computer screen was positioned 1 m from their eyes at a visual angle of about 6.27°. We used Eprime 2.0 (Psychology Software Tools, Pittsburgh, PA, United States) to present a revised SHOP paradigm ( Knutson et al, 2007 , 2008 ; Karmarkar et al, 2014 ; Banker et al, 2021 ), with 2 (price levels: high vs. low) by 2 (payment methods: mobile vs. cash) within-subject design.…”

Personal Credit and Financial Vulnerability

“…The prevailing hypothesis with credit card spending has been that, because of their nature (contactless, future payments etc), they help reduce the pain of buying, thereby increasing expenditure (Lo & Harvey, 2011). However, emerging neural research offers an alternative hypothesis, suggesting that in addition, credit cards differentially activate the reward network versus cash, increasing the motivation to spend (Banker et al, 2021). One explanation for this may be the result of reinforcement of credit card use and emerging behaviours as people become familiar with credit cards-the UK has one of the highest rates of credit card adoption in the world, with more than 52m open accounts (Megaw, 2021).…”