Register for an account


Enter your name and email address below.

Your email address is used to log in and will not be shared or sold. Read our privacy policy.


Website access code

Enter your access code into the form field below.

If you are a Zinio, Nook, Kindle, Apple, or Google Play subscriber, you can enter your website access code to gain subscriber access. Your website access code is located in the upper right corner of the Table of Contents page of your digital edition.


Going for the pain of paying

Gene ExpressionBy Razib KhanOctober 9, 2009 3:59 AM


Sign up for our email newsletter for the latest science news

For Gun-Shy Consumers, Debit Is Replacing Credit:

Visa announced this spring that spending on Visa debit cards in the United States surpassed credit for the first time in the company's history. In 2008, debit payment volume was $206 billion, compared with credit volume of $203 billion. MasterCard reported that for the first six months of this year, the volume of purchases on its debit cards increased 4.1 percent, to $160 billion, in the United States. Spending on credit and charge cards sank 14.8 percent, to $233 billion. "Consumers are rational thinking individuals, and they're going to shift their behavior in a way that fits with their current economic situation," said Scott Strumello, an associate with the Auriemma Consulting Group, a Long Island-based payment card advisory firm. "They're thinking more seriously about it, and many may decide, 'I'm going to use debit where I can and reserve credit for larger purchases.' "

I think really what's going on here is that people are embracing the pain of paying; when you decouple time of payment from what you're purchasing that tends to result in more purchase than would otherwise be the case. A perfectly rational individual wouldn't need to make a distinction between debit and credit, what does it matter if you pay for a latte tomorrow (that is, it comes out of your account tomorrow) vs. the next billing cycle? No, people are rational about the fact that they are irrational. Pay later = buy more, pay tomorrow = buy less. If you want to buy less then heighten the immediacy of the cost.

    3 Free Articles Left

    Want it all? Get unlimited access when you subscribe.


    Already a subscriber? Register or Log In

    Want unlimited access?

    Subscribe today and save 70%


    Already a subscriber? Register or Log In