MIT researchers offered MBA students the opportunity to bid on tickets to a professional basketball game between the Boston Celtics and the Miami Heat.
The participants were divided into two groups with one major difference…In one group, students were given a sheet which told them they must pay for the tickets in cash and required them to confirm they had easy access to an ATM machine. In another group, the sheet said students must pay by credit card and needed to specify which credit card type they would use including Visa, Mastercard, or Amex. In both conditions, participants had to pay by 5PM the next day.
What the researchers found was that people were willing to pay as much as 60% more for the same exact tickets when using credit cards instead of cash.
So much for the one to three percent in “free” points or cash-back you get with a credit card!
What’s the lesson here? Use cash.
I didn’t own a personal credit card for 10 years. I only have a personal credit card now because my wife kept harassing me about not earning us points.
When possible, I still use cash. This is impossible in some circumstances when the hipster coffee shops with delicious coffee I love don’t take credit cards…
(I tricked her though…I now use Privacy.com which has masked debit cards, not credit cards, for most of my online purchases for “privacy protection”…with the side benefit of not using a credit card.)
I guarantee you will be better off financially if you switched all your purchases to cash or debit cards. Credit card points aren’t worth it if you spend 60% more because you use a credit card.
Cut up your credit cards and your wealth will rise like a balloon no longer tethered to the earth.
(By the way, the MIT study was called Always Leave Home Without It, which should tell us something…)