Maybe credit cards don’t encourage spending

An interesting counterpoint to the David Ramsey “no credit” creed I linked to below:

The gold standard method for determining causality is a controlled experiment. Recently, two academics ran the only published field trial of which I am aware that randomly assigned credit card vs. cash purchase opportunities to people in a live commercial environment. Their conclusion: “Surprisingly, we find that credit cards do not increase spending.”

Please do be so kind as to share this post.
Share

4 thoughts on “Maybe credit cards don’t encourage spending

  1. The credit card part I think take it or leave it. But his emphasis on debt reduction I find very helpful. Debt is not an asset. I don’t know how many people I’m met around my age who talk about their unpaid off house/condo as if it were an asset. Dude, if you’re still paying every month, it’s called a deficit.

    The other thing (related to that point) that he hammers home is that minimum monthly payments setup are a fraud to squeeze more interest in the long run off a person. Though that might seem like a rather elementary economic fact to some, I think that actually is a light-bulb moment for many.

      Quote  Link

    Report

  2. I would like to read Manzi’s post, but The American Scene has been pretty much completely down for the last 24 hours (503 Service Temporarily Unavailable). I’m not sure how you were even able to read the article. Matt Frost needs to feed the hamsters powering the site.

      Quote  Link

    Report

  3. I don’t know how many people I’m met around my age who talk about their unpaid off house/condo as if it were an asset.

    To the extent its value exceeds the amount of the debt, it *is* an asset. Furthermore, it is a leveraged asset. You bear more risk, but you likely get a higher return over buying it outright.

      Quote  Link

    Report

Leave a Reply

Your email address will not be published. Required fields are marked *