How did you make the payment for your shopping bills lately? I think credit card! Right, as they are usually more convenient to use than cash. Well, if used sensibly, debit (not credit) cards can be an important financial instrument. There are several psychological reasons which prove that the use of credit cards can be hazardous to your financial health and one of the biggest issues being “overspending”. Let’s understand this better:
Use of credit cards stimulates overspending
We tend to spend more while paying with credit cards than cash. It also arouses a desire which ultimately compels us to go beyond our means. With the power of credit cards and the EMI culture, each one of us can buy helicopters also! Sounds funny, but it’s very simple. All you need to pay is Rs.6,667 per month for the next 200 years.
Now one may laugh at this, but if you delve further, you will realise that the use of credit cards has literally removed the difference between 'Buying' and 'Affordability'. It has made us believe that we cannot only buy, but we can afford each and everything that is available on earth. This phenomenon has extended to all the products we buy like mobile, car, TV, camera and even apparel!
Pleasure of buying v/s Pain of paying
Whenever and whatever you buy, there will always be a pain and that is called the pain of 'paying', especially while making payments with cash. Parting with cash causes great pain inspite of the pleasure of owning your desired object. And what is a better way out than using a credit card to avoid this pain? The use of credit cards delays the payment and ultimately the pain of paying.
Benefits vs Costs
You pay more attention to the benefits of a product while paying through credit cards and focus more on the costs associated with the product while paying cash. Credit cards prompt you to purchase things you really don’t need and way beyond your budget. It makes you lose control over your spending too. Retailers surely know these very well and therefore use various tactics to stimulate your pleasure points and desperately want you to use your credit cards. This enables a shift in focus towards the benefits than the cost.
So, what should you do?
Start making payments in cash or use a debit card if at all using plastic money is a necessity. Debit card would bring more alertness than using credit cards as the money is coming from your account balance only. If using a credit card is a must, then be alert about the price of the product and other factors as discussed and set aside cash immediately. It would stop you from spending money that you don’t have.