The moment you start getting your first paycheck and setting up your bank account, you find yourself bombarded with credit card salesmen trying to make you sign-up for one. 

For the most part, they are free, so you say, “why not?” 

But then again, you find yourself approached by some other banks who want you to sign-up for their credit cards as well. 

“With our credit card, you get miles, you get free access to airport lounges, you get special discounts and offers, you get to pay now for specific merchants and install the payment in 6 months with 0% interest rate, you get, you get… and then you get some more.”

Even some of the credit cards would give you an offer to buy Starbucks coffee and get the second one for free. Coffee lovers, this sounds incredible. Right? 

I confess. I have more than one credit card because I did fall into this trap, but thankfully, I only use one and maintain the payments on time. 

What makes it even more interesting, is that when banks find you paying on time, they reward you with even a bigger limit. I mean, ok guys, you know my salary, why on earth would you triple or quadruple my limit? You know I can’t repay it next month, so why do you give me the option? 

It could be in my humble opinion, to get intrigued to buy more, beyond my means. I would not be able to repay the next month the full amount, and then I start paying interest on my mini credit card debt.

And… that could be one of the ways that banks make money. 

But then again, having a credit card helps in terms, when I pay for company “stuff” and reimburse it later… Sometimes I don’t have enough cash to wait one month, if not more, for the finance team to reimburse my money. This is not a typical problem for people though — a special me situation. 

When I speak to people about credit cards, they either say: 

  1. “I hate credit cards. I only use my debit card. If I don’t have the money, I don’t buy it. Simple.” — Chapeu 
  2. “I use a credit card, but I settle it immediately every month once the salary kicks in.”
  3. “I pay the minimum amount every month. After a few months when the amount accumulates, I pay it altogether.” 
  4. “I pay the minimum amount, and then add some more every month until I pay it off completely.” 
  5. “I pay the minimum amount, and when things got out of hand, took a personal loan to repay the whole amount and now I am repaying my personal loan.” 
  6. “I pay the minimum amount and have no clue how I am going to repay the whole amount. I don’t have enough cash.” 

You might relate to one of those six categories… and if you are not careful enough, you could fall into the 33% of credit card debtors or 28% personal loan debtors in the UAE, according to a survey by Khaleej Times.

The question that intrigues me is… 

Why do we fall into this position from the very start? 

Is it because banks give us more credit limit than we can actually afford? Or should we take some responsibility for our actions? 

We are intrigued, we are impulsive, and we want to live the moment, so we pay now, and think about it later. Is it because it has been so easy to pay?

In his book, Brainfluence, Roger Dooley, pointed out an interesting fact. 

“One of the key insights neuroeconomics and neuromarketing research have provided us is that buying something can cause the pain center in our brain to light up.”

Dooley, Roger. Brainfluence 

Just in case… 

Neuroeconomics examines how economic decision making happens in our brains.

Neuromarketing is the study of consumer behavior using brain imaging, scanning, or technology measurement techniques to understand our behavior and responses to products, packaging, advertising, etc. 

So, what did Roger, point out exactly? 

We feel pain whenever we pay — that simple. 

We feel pain when we pull out the money out of our pockets and buy “something” — anything. 

But then Roger explained that paying with a credit card actually alleviates this pain, so you don’t feel as much pain paying in cash as paying in credit, especially, if you can repay the credit in small increments, at some point, in the future, but not now. 

“The problem is that, for many consumers, the credit card takes the pain (quite literally, from the standpoint of the customer’s brain) out of purchasing. Pulling cash out of one’s wallet causes one to evaluate the purchase more carefully. We think this makes a lot of sense and is entirely consistent with real-world behavior. A credit card reduces the pain level by transferring the cost to a future period where it can be paid in small increments. Hence, not only does a credit card enable a consumer to buy something without actually having the cash, but it also tips the scale as one’s brain weighs the pain versus the benefit of the purchase. This can be a bad combination for individuals lacking financial discipline.” — Dooley, Roger. Brainfluence 

Perhaps even Apple pay or mobile payments would make it worse. Since I have installed Apply pay on my phone and I am loving it. Not only I don’t have to feel the pain of getting the cash out of my wallet, but I also don’t have to feel the pain of getting my credit card out of my wallet. 

While from a customer experience perspective it’s incredible to pay with Apple pay, I wonder if people who use mobile payments started to spend more… Hmmm… Something to think of. 

To keep it simple, if you are in debt, stop using your credit card. Start paying in cash, feel that pain and well, eventually, your spending habits would change. 

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