We probably did not need rocket scientists to tell you that credit card purchasing makes you feel good, but the level of detail MIT brings to the table is at least interesting to understand. As London’s Daily Mail points out,
- Now a study by the Massachusetts Institute of Technology (MIT) shows that credit card spending triggers the same chemical reaction in the brain as addictive drugs such as cocaine and amphetamines.
- But different cards can spark different desires, the study showed. Cards used in restaurants and on holidays create a greater appetite for spending than cards used to buy fuel, for example.
Hmm, the drug connection is a little aggressive. Still, there indeed is a “feel good” associated with my laying down my Discover It card, especially when I am at the right store during their quarterly 5% reward rotations. During 1Q21, that means I get 5% back at grocery stores, Walgreens, and CVS. Next quarter, it is gas stations, wholesale clubs, and streaming services.
Now, the 5% does not make me want to buy more than I need, but I will take the 5% and feel good about the savings. OK, I am a rewards junkie. Now, back to the rocket scientists at MIT.
- The study’s co-author, Professor Drazen Prelec, said: ‘The reward networks in the brain that are activated by all kinds of rewards are activated by a credit card purchase.
- ‘The act of putting that plastic credit card in your hand is associated with enjoyable purchases.’
- The researchers studied brain scans of participants who used personal credit cards or cash to make real purchases of everyday products.
- The findings, published in journal Scientific Reports, found that cash purchases did not stimulate ‘reward networks’ in the brain.
Here is the study for those equally inclined to understand the nerdy details. But be prepared for the gory details, such as the authors talk about brain scans.
- Specifically, within each region of interest, we analyzed the relationship between signal change and purchasing behavior at each acquisition point (TR). Following prior literature applying the SHOP paradigm 21,22,25, time courses were lagged by 4 s to compensate for the delay in the hemodynamic response; the time courses depicted in the figures reflect this 4 s lag. To identify the differential purchase signal associated with credit versus cash purchases, we first conducted logistic regressions of the purchase decision on the ROI signal change, payment method, and their interaction at each acquisition point (results shown in Fig. 4).
- In specific, for each ROI and acquisition point, we fit the following regression equation:
- Buy=logit(b0+b1∗ROIactivation+b2∗PaymentMethod+b3∗ROIactivation∗PaymentMethod)Buy=logit(b0+b1∗ROIactivation+b2∗PaymentMethod+b3∗ROIactivation∗PaymentMethod); Buy corresponds to the decision to purchase (Buy = 1, NoBuy = 0), ROIactivation refers to the activation in the particular ROI at the acquisition point on the trial, PaymentMethod refers to the contrast coded treatment (Credit = 1, Cash = − 1).
And, call me an operational hack, but what is this?
- please note that the key interaction effects in the striatum remain significant after Bonferroni corrections
I am not embarrassed to say that sent me to google, where I found a Bonferroni correction is:
- The Bonferroni correction is a multiple-comparison correction used when several dependent or independent statistical tests are being performed simultaneously (since while a given alpha value. may be appropriate for each individual comparison, it is not for the set of all comparisons).
Well, let’s cut to the chase. Using credit cards makes you feel good. We could have saved a lot of time and academic research on that one.
Know what makes you feel even better?
Paying off the debt.
Don’t be a revolver if you can help it. Be a credit card transactor.
You will feel even better.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
