Academic journal article The Psychological Record

The "Negative" Credit Card Effect: Credit Cards as Spending-Limiting Stimuli in New Zealand

Academic journal article The Psychological Record

The "Negative" Credit Card Effect: Credit Cards as Spending-Limiting Stimuli in New Zealand

Article excerpt

Credit cards are a convenient and widely accepted method of payment for goods and services. In New Zealand, estimates indicate that there are more than 2.1 million VISA cards and 900,000 MasterCards in use (Commerce Commission, 2006). Credit card usage is increasing and is accompanied by an overall increase in credit card debt. Total credit card debt owed nationally in New Zealand grew over the past decade from NZ$1.7 billion (September 1997) to NZ$5.2 billion (October 2008; Reserve Bank of New Zealand, 2008). As credit card usage and subsequent debt escalates, it is becoming increasingly important to understand the effects of credit cards on consumer spending behavior.

A limited body of research exists that suggests that credit cards (and credit card symbols) act as "spending-facilitating stimuli," and, as such, can affect the purchasing behavior of consumers. In a series of four experiments, Feinberg (1986) systematically studied the effects of credit card presence versus absence on the perceived value of consumer items. In Feinberg's first experiment, undergraduate students were presented with a booklet containing seven consumer items and were asked how much they were willing to spend on each item. For half the students, the MasterCard symbol was presented on the table with the booklet (credit card present, or CCP, condition), while no symbol was presented for the other half (credit card absent, or CCA, condition). Although participants in the CCP condition were told that the MasterCard symbol was from another experiment, Feinberg found that those in the CCP condition placed consistently higher value on items compared to those in the CCA condition. Feinberg replicated this effect in his second experiment and also demonstrated that participants' decision times were faster in the presence of the credit card symbol. In two further experiments, Feinberg investigated how much people were willing to donate to charity in the presence or absence of a credit card symbol. He found that participants estimated greater donation values (Experiment 3) and donated more money (Experiment 4) when a credit card symbol was present. Thus, Feinberg concluded that credit cards were spending-facilitating stimuli (i.e., stimuli that facilitate a spending response). This phenomenon of increased expenditure (or likelihood to spend) in the presence of credit card symbols has become known as the "credit card effect."

Subsequent attempts to replicate Feinberg's (1986) credit card effect have been mixed. Hunt, Florsheim, Chatterjee, and Kernan (1990) attempted to replicate the effect while also taking into account a measure of materialism, based on the assumption that materialistic individuals would be more influenced by the credit card symbols. However, they found no effect of the credit card symbol on price evaluations, irrespective of materialism levels. Shimp and Moody (2000) also conducted two experiments using procedures similar to Feinberg's and tested two possible explanations for the credit card effect. They reported no support for either of the explanations they investigated and replicated the credit card effect in only one of the two studies.

Other experimenters have replicated Feinberg's (1986) credit card effect. McCall and Belmont (1996) found that diners in two different restaurants gave higher tips on tip trays containing credit card symbols when compared to diners who received blank tip trays. McCall, Trombetta, and Gipe (2004) found that credit card symbols had a similar effect on estimated tip sizes in a laboratory setting. In another laboratory-based experiment, Monger and Feinberg (1997) found that participants estimated higher fair and maximum prices that they would pay for products when they were informed that the mode of payment was credit card compared to participants who were told that the mode of payment was cash or check. Similarly, Prelec and Simester (2001) found that participants who were instructed to pay via credit card in an actual auction placed higher bids than those who were instructed to pay by cash. …

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