Live now. Pay later.

The Ritcey Report

Written by Lynn Healy-Goulet
March 22, 2018

There are several evocative and revealing terms that professional retailers use when they talk technically about consumer shopping practices.

One is ‘the moment of truth’. This refers to the action a shopper takes when he or she – in a supermarket, perhaps – reaches out for an item and transfers it to a shopping cart. That choice represents the ultimate objective of the retailing experience.

Another is ‘the pain of payment’ – the actual, visceral sense of loss we feel when we exchange our hard earned money for a product. That ‘ouch!’ factor is one retailers work hard to minimize and soften.

Credit cards play an interesting – and crucial – emotional and cognitive role in both these transactions. They actually go a long way to neutralizing the negative associations many of us encounter when we buy stuff, especially when we buy stuff and pay for it with cash.

The dirty secret

There is a dirty secret about credit cards. They alter the calculus of our financial decision-making. Buying something with cash hurts. Paying with a credit card, while not necessarily pain free, measurably reduces the pain of payment.

Less is more

The less pain we feel, the more we are inclined to spend. This is not simply intuitively true. It’s a cold, hard fact about consumer spending and is supported by many credible sources.

For example, Scott Rick1 Ph.D writing in Psychology Today (Why we overspend with credit, June 22, 2013) made the following documented observation:

‘It is less psychologically painful to swipe a credit card than to physically hand over cash. Spending differences between tightwads (who chronically find spending painful) and spendthrifts (who don’t find spending painful enough) were smaller when people were required to use credit to make purchases than when people were required to use cash. Credit helps to anesthetize the pain of paying, and it caused tightwads to nearly catch up to the spending levels of spendthrifts.’

Not all bad

While all of these technical observations about credit cards – and there are others – are true and compelling, I don’t want to give you the idea that I think they’re necessarily a bad thing.

Credit cards are ubiquitous. We use them to buy lunch, make an online purchase, confirm a hotel reservation, and book a vacation. And, as long as we use that card with caution – which includes paying off the outstanding balance in full at the end of each month – its virtues of convenience and speed of payment far outweigh most of its vices.

Patterns and practices

And, if you check your credit card statement carefully each month, it provides you with an invaluable written accounting of your spending patterns and practices. Such a monthly document can contribute not only to your peace of mind, but also to your financial allocation decisions when the time comes to file your income tax.


That said, while researching this blog, I did come across an alarming – and also slightly bizarre – story about credit cards.

I chanced upon an article by journalist Janet Bodnar2, writing for Kiplinger’s Personal Finance (Kitty Card for kids is insidious credit ploy, March 27, 2005). Wrote Ms. Bodnar:

“Not long ago, I was asked to appear on a TV show to discuss whether youngsters should carry credit cards. ‘What’s to discuss?’ I asked the producer. ‘That’s the dumbest idea I’ve ever heard.’

Not so fast, I was told. Some people think that if kids use credit cards while they’re still at home being watched by their parents, they will handle credit responsibly when they’re on their own. I repeat: It’s the dumbest idea I’ve ever heard.

Giving your teens credit cards is like letting them use drugs early so that they won’t turn into addicts.”

Credit cards are fine, and they’re probably here to stay. Our job as mature consumers is to understand the underlying psychological mechanism driving them and, as a result, keep paying with plastic in perspective.

Dave Ritcey, The Ritcey Team, Scotia Wealth Management