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Credit cards and your brain

November 18, 2008

Jonah Lehrer has a very interesting take on an addictive practice.

“… one of the reasons credit cards are such a popular form of debt is that they take advantage of some innate flaws in the brain. When we buy something with cash, the purchase involves an actual loss – our wallet is literally lighter. Credit cards, however, make the transaction abstract, so that we don’t really feel the downside of spending money. Brain imaging experiments suggest that paying with credit cards actually reduces activity in the insula, a brain region associated with negative feelings. As George Loewenstein, a neuroeconomist at Carnegie-Mellon says, “The nature of credit cards ensures that your brain is anaesthetized against the pain of payment.” Spending money doesn’t feel bad, so you spend more money.”


I’d love to see the insula jump up and down when the monthly bill arrives.

The thing is, minds work by association. When you’re staring at your monthly statement, your card’s usually safely stashed out of sight. The mind does not associate the pain of paying up with that piece of plastic. This clever separation might explain why your heart pumps faster when you’re opening the bill enevelope than when you’re swiping your card at the store.

2 Comments leave one →
  1. November 18, 2008 9:28 am

    Hmm, that’s why I feel that there should be some sort of mechanism to allow people to check how much they’ve signed EASILY and while on the move. Maybe SMS? or when you sign the card, the receipt will be showing how much you’ve signed. πŸ˜€

    Hmm… you mean to see how much you’ve spent cumulatively? It’ll be neat of you can specify a weekly spending threshold and have the system push an sms to you if you exceed it. I’m not sure if it will really stop those bent on retail therapy though. πŸ™‚

  2. November 18, 2008 1:47 pm

    Ya… that’s all so many ppl being broke becoz of credit card. Since you can own something that you shouldn’t be owning.

    I keep my cards at home and only use them on overseas travel, if at all.

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