2 Credit Card Spending Phenomena You May Experience

This is day five of our series Put a Bow on Your Holiday Budget: 6 Days of Advice.

Holiday shopping takes a toll on credit cards and pocketbooks nationwide.

Credit card spending

Research suggests a few phenomena occur depending on how you use your credit card.

Sales for the 2011 holiday shopping season have increased 2.8 percent compared to 2010, according to the National Retail Federation. It’s a healthy sign for an economy that depends on its consumers, but budget-conscious military and veteran spenders may not want to spend too freely.

A few phenomena may be the cause of this increased spending. Learn about them to keep from falling victim to them.

Signing effect

A study from the University of Miami discovered shoppers are more likely to spend more on themselves at shops they like after they sign their name for a credit card purchase elsewhere. For example, when a wife buys something for her husband with a credit card, signs her name and goes to one of her favorite stores afterwards, she’ll probably spend more time there and buy something.

Here are a few ways to avoid this phenomenon:

  • Pay with cash
  • Make lists of gifts and/or stores and live by it
  • Look at your receipts and add up your total spending after each purchase
  • Save your credit card purchases for last so you can go straight home after you sign the receipt

Obscuring cost

The Journal of Consumer Research found that how consumers pay for a product changes their mindset after the purchase.

When consumers use credit cards, the cost is overlooked and euphoria sets in. The same study discussed “the credit card premium,” which means consumers spend more when they use a credit card than when they make purchases with cash.

To help curb this, consumers should consider isolating credit card use to as few cards as possible and only use cards at stores that offer rewards.

Conscious purchases

Above all else, be a conscious spender.

During the holidays, it’s easy to get carried away amid the sales, decorations and lines for Santa. Curtailing the abuse of credit cards is a must, especially for service members, veterans and spouses on a tight budget.

Photo thanks to sovietmole under a Creative Commons license on Flickr.