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This Week In Your Wallet: Pause Before Plastic

What’s not news? Research shows you’ll spend more with a card than you will with cash. What is news? The fact that we’re now so reliant on plastic that the possibilities to overspend are exploding.

The New York Times’ Nelson Schwartz dove into this subject, citing two studies that show just how much more we spend using cards rather than cash money. In the first, MIT researchers documented that students vying for sports tickets offered to pay twice as much on credit cards than when they had to use the green stuff. In the second, when credit card images (insignias and logos) were placed on restaurant tables by Purdue U. researchers, patrons not only spent more, they left bigger tips. “Just as Pavlov found that dogs would salivate when they heard tones that were associated with food, people have been conditioned to associate credit cards with spending,” Purdue’s Richard Feinberg told Schwartz.

For many people — myself included — moving as much of my spending to plastic as possible has become a goal for two reasons. One, miles and points. Two, trackability. My business expenses have become a much simpler endeavor since I started putting ev-er-y-thing on the Amex.

The takeaway, if you don’t want to overspend, is to first be aware of the fact that you’re likely to behave this way. If you suspect you’re spending too much simply because your credit limit allows it, conduct a personal experiment. Try using cash for discretionary spending for a month and track the difference in your outlay. And if you carry a balance on your your cards, make sure you’ve already switched to one with the lowest interest rate going. In this scenario, trying to rack up rewards (because rewards cards tend to have higher interest rates) isn’t the way to go.

Quick Savings Hack

While we’re on spending… The blog Yes and Yes has a 5-second money-saving trick that’s simple but effective. Anytime you see something you want, but it’s not on your mental (or written down) list of needs, think about how much you’d be willing to pay for it before you look at the price tag. Sometimes, you’ll think $5 and see $40 on the tag. Write that off as a no-go. But other times, you might be surprised at a great deal.

Gift Cards For The Future

As we head into the holiday season, here’s a new way to give something meaningful to the kids on your list. The first physical 529 gift cards will be available November 7 in Toys “R” Us and Babies “R” Us stores nationwide in amounts from $25 to $500. They’re through Gift of College, a site that acts as a gift registry for college savings, and after the parents of the child receiving the gift card create a profile on the site, they can transfer the money to a 529 account of their choice. The cards have an additional purchase charge between $3.95 and $5.95, depending on the amount, and that fee is a little lower than you’d pay on, say, a Visa gift card.

Another thing to note? If the recipient already has a 529 account, you can give directly online and bring the costs down. (The site charges 5 percent of the gift, capping at $15, and that’s added on to the amount you’re choosing to give.) And if you’ve got young college grads on your list, these gift cards can be used to help repay student loans. Finally, if you have leftover gift cards you’re not using, you may be able to exchange them for 529 dollars. Through the Gift of College site, a $50 Barnes and Noble gift card is worth $34.50 in 529 cash, and a $100 Home Depot card is worth $77.

Have a great week,


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