Purchasing with Credit or Cash? Are you registering the “pain” with that purchase?
There have been many studies that talk about the “pleasure/pain” trade off when making purchasing decisions. What is the difference between purchasing with credit vs cash? You get pleasure from the new item or service your are getting, but when you pay with cash you also register the fact that that your hard earned cash is being handed over to the clerk. It appears, that cash sales seem to immediately trigger “pain” (i.e. parting with the cash) and thus people studied have show greater personal restraint when using cash vs. when using debt or credit cards. These studies conclude that the “pain” part is not registered in the brain in the same way when using a credit card so people are not as good at resisting the temptation to impulse buy when its so easy just to whip out the credit card
Credit allows you to purchase things and pay later, creating debt. Credit is not a right to every consumer, rather, it is a privilege and should be treated with some understanding and care.
The Top Advantages making everyday purchases with cash.
The Advantages of Buying with Credit:
- Most credit cards offer 30 days of free credit
- It can be used quickly if no cash is available
- It can be a way to learn proper budgeting
- Paying credit bills on time builds a positive credit rating
- Credit payments can be withheld if a broken or defective good needs to be replaced or repaired
- Acts as a safety net in an emergency situation.
The Disadvantages of Buying with Credit:
- Credit cards may encourage you to impulse buy
- Limits future available funds – Money needed for interest isn’t available for future use
- Interest on the credit sneakily increases the cost of the goods or services purchased
- Items could be repossessed (taken back) if all payments are not made; the payments made to date will be lost
- Late or absent payments generate a negative credit rating – hurts your future!
- Credit contracts can be complicated with big penalties hidden at the end – the small print may mean that you are inadvertently hurting your credit rating
- Consumers often buy expensive merchandise that they cannot afford because they are tricked into “having more time to repay the debt”
- If you are buying on credit, you may be less picky and less likely to shop around for good “cash deals”
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