If you’re a longtime reader of this newsletter, you might know that one of my favorite things to talk about is the psychology behind saving and spending. After all, it’s easy to say we’ll stop spending; it’s a whole other ballgame to actually do it. And, I find that knowing the “why” behind our financial behavior is especially helpful when we’re trying to change that behavior.
To that end, I have two fascinating studies I wanted to share with you this week — both of which might help you think about spending in a different light. The first comes from the Journal of Consumer Research, and it concludes that wanting an item might be more important to our happiness than actually having that item.
“Thinking about acquisition provides momentary happiness boosts to materialistic people,” writes Marsha Richins, author of the study. Richins goes on to note that because people think about this “acquisition” a lot, they get frequent mood boosts. However, the positive emotions associated with actually obtaining the desired item don’t last for as long.
“Materialists are more likely to overspend and have credit problems, possibly because they believe that acquisitions will increase their happiness and change their lives in meaningful ways,” Richins concludes. Translation? The expensive painting you saw in the antique store might just make you happier staying in that store, rather than denting your wallet and decorating a wall that looks fine as is.
The second study I wanted to pass along was released in November, and I rediscovered it this weekend when someone linked to it on Twitter. Also from the Journal of Consumer research, the study found that people are more likely to spend worn-looking bills than crisp, new bills.
In a series of tests, consumers were given either worn bills or crisp bills, and were asked to go shopping. These test subjects consistently spent more with the worn bills than they did with the crisp ones — and they were more likely to break a larger, worn bill than pay in exact change with crisp, smaller denominations. “They physical appearance of money can alter spending behavior,” the authors of the study wrote. “Consumers tend to infer that worn bills are used and contaminated, whereas crisp bills give them a sense of pride in owning bills that can be spent around others.”
The takeaway for you? The next time you withdraw money from your bank, ask the teller for newer bills — you’ll be less likely to spend those!
And now, here are the other headlines for the week:
Credit Card Surcharges
If you tried to pay for something with your credit card this past weekend and noticed that there was a 4% surcharge, your eyes weren’t deceiving you. As Time magazine explains, credit card issuers have long been making money off of interchange fees, which have been paid by the merchants. Thanks to a new ruling (that is still being disputed and, most importantly, isn’t legal in ten states), merchants can now pass that surcharge along to you, the customer.
The good news is that if you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma or Texas, you won’t see the surcharge — these are the states that have laws prohibiting the fee. If you live in one of our other 40 states, there’s still a bit of good news for you: this charge only applies to credit cards, so you can still safely use your debit, or cash. Also, stores will have to tell you if they’re going to add this fee, so as long as you keep your eyes peeled for signage on the door or at the register, you won’t be taken by surprise.
More Credit Card News
While we’re on the topic of credit card news, I wanted to share this article from Credit.com with you: it ranked the best cards for balance transfers in 2013. If you’re trying to pay down your debt this year, transferring to a lower-fee card (or a card with an excellent introductory rate) might be a good way to help get your balance down to zero. Credit.com’s winner was the Slate card, from Chase — not only does it have no balance transfer fees, it’s also offering a 0 percent APR financing for fifteen months. Not bad!
The Price Wars Continue
… but have they met their match? Over the past few months, I’ve shared articles with you that have talked about the ongoing problem of price fluctuations for items other than airline tickets. Supermarkets and online retailers alike have been experimenting with personalized pricing and price variations based on the day of the week — which might be good for their bottom lines, but it’s terrible for our sanity! Luckily, there are a growing number of sites and companies out there looking to re-simplify the shopping process for us, and the New York Times recently profiled the best ones. If you’re sick of playing guessing games when it comes to the best price for the new pair of rain boots you need, Hukkster.com, Decide.com, and DigitalFolio.com are just three sites that will do the work for you. Each site works a little differently — Hukkster sends you an email when your item hits the price you’re willing to pay, while Digital Folio can function as a sidebar on your browser — so I recommend checking each one out and seeing which one is right for you. You’ll be amazed at how much time and aggravation (not to mention, money!) you’ll save.
Have a great week!