Good cash or bad credit? Something to consider as you shop for Christmas

Credit cards come in handy at this time of year, especially if you’re cash-poor and have a whack of friends, family and co-workers to buy for in a short amount of time.



The holidays are impossible financially. At no other time of year do we have to buy so many gifts for so many people—friends, family, colleagues, neighbours—in the span of a few weeks. No wonder credit card charges skyrocket in the month of December. 

But while laying down plastic is often a necessary evil, you might be surprised (or you might not be so surprised) to find out that relying on credit doesn’t just put off the inevitable pain of debt, it can also encourage excessive overspending.

Marketing researchers (via at the University of South Carolina argue that credit cards reflect consumer desire to offset the anxiety that comes with overspending by deferring the pain of financial loss. While credit cards offer a rush of exhilaration followed by a slow descent into poverty-related stress, paying cash is more immediate—kind of like ripping a band-aid off in one swipe. 

Credit cards offer the illusion of wealth while maintaining long-term poverty. Tell me something I don’t know marketing researchers.  

Promothesh Chatterjee and Randall Rose did find something unique, however. They discovered that using credit cards may encourage people to buy more lavish gifts than if they were paying with cash. Their research indicated that credit card users tell themselves a convenient story about these pricey gifts. Instead of focusing on the cost, a.k.a. the bottom line, they tell themselves they’re paying for better quality or that little extra something special that only a Made In China sticker can denote.  

Interestingly, the researchers found the opposite was true of those who paid with cash. For these consumers, the bottom line was the greater concern. They were having none of the “quality” or “something special” story. 

While the researchers’ observations may not magically put cash in your hand. Their findings do offer food for thought. Is there really such a vast difference between an iPod or an MP3 player, a Kindle or an iPad? Or is the “little something extra special” really just advertising fairy dust?