Committing to Plastic: The Effect of Credit Cards on Purchase Intention

Abstract

When deciding to buy a product, consumers balance consumption utility against financial and psychological costs (pain-of-paying). It has been suggested that credit cards buffer against the pain-of-paying and thereby facilitate spending (the credit card “lift”). We show, first, that credit cards do indeed increase the within-subject likelihood of purchase from an online store closely resembling amazon.com, in a setting where every purchase decision counts and shoppers choose their own consideration set from millions of available products (studies 1-2). Second, we find that the credit card lift disappears for purchases from a prior “wish list”, suggesting that the lift is specifically concentrated on unplanned or impulse purchases (study 3). Finally, we show that credit cards exert influence when a person forms an initial, fully reversible intention to purchase, as shown by the decision to proceed to a checkout screen, and not at the moment of irreversible implementation, at checkout itself. If payment method information is not available at the moment of purchase intention but instead specified only at checkout, then the credit card lift disappears and purchases are made with same frequency as with cash (study 4). This result cannot be reconciled with a rational, financial interpretation of the credit card lift. It also suggests that the lift is better interpreted as a phenomenon of “spending facilitation” by credit cards, rather than one of “spending inhibition” by cash.