Could Easier Payment Methods Lead to More Spending and Debt?

Shopping trends are moving toward easier forms of payment. We’ve moved through cash and check, and most of us swipe some kind of plastic, either a debit card or a credit card, to make payments. However, swiping isn’t the easiest way to pay. There are cards that come with RFID chips that allow you to simply wave the card in front of a point of sale terminal and complete the transaction that way. Additionally, a new technology, near-field communication (NFC) is being adopted by many makers of digital wallets to allow you to complete transactions — including credit card transactions — using your smart phone.

These contact-less payments are meant to make it easier for consumers to pay, even at brick and mortar locations. Convenience is the key, and it might even lead to more spending. According to a recent study of contact-less payments by MasterCardAdvisors indicates that those who don’t have to swipe spend almost 30% more than someone who has to swipe. The ease of payment means that it’s easier to spend more money.

Could this Mean More Spending and Debt?

For card issuers, this is great news. The MasterCard study divided spenders into three groups: low, medium, and high. However, it didn’t matter which group the user was in; there was a lift in spending across all groups. There have already been studies that indicate that consumers spend more money when they are using cards as opposed to counting out cash at the register. Psychologically, it seems less painful to swipe a card than to count out the cash and physically see what you are spending.

And, from this most recent study, it appears that it might be even easier to just wave a form of payment in the direction of a terminal and then forget about the charge. Convenience plays a role in our spending decisions, and it looks as though we are willing to spend more if it’s more convenient to pay for it.

Consumers, of course, could find themselves spending more money and even getting into debt. Increased spending can mean fewer financial resources going to pay off debt or save up. The encouragement to spend is a prime motive for card issuers and retailers alike. The next evolution in payment technology could be a push toward increased spending by consumers. For those who don’t track their spending very well, this could also lead to an increase in debt.

Pay Attention to Your Spending

In the end, though, you are responsible for your own spending habits. Even though there are marketers and others trying to increase your purchase rate, it doesn’t mean you have to play along. Make sure you pay attention to your spending. Record each transaction in a personal finance application, or in a paper ledger. Either way, making a record of your transactions can help you spot spending patterns, and help you recognize how much you are spending — and what you are spending it on. This is important knowledge if you want to avoid going into debt. Watch your spending, and stick to a financial plan, and the type of payment method you use won’t matter as much.