Credit card cue effect

Abstract

Purpose The extant literature has mixed results regarding the credit card cue effect. Some showed that credit card cues stimulate spending, whereas others were unable to replicate the findings or found that cues discourage consumer spending. The purpose of this paper is to investigate how consumers’ sensitivity to the pain of payment affects their mental associations about credit cards and how the differences in credit card associations moderate the credit card cue effect on spending, providing a possible explanation for the mixed results in the literature. Furthermore, this paper examines the role of consumers’ perceived financial well-being, measured by their perceptions of current and future wealth and their sense of financial security, in mediating this moderation effect. Design/methodology/approach An experimental study was conducted with a sample of 337 participants to test the hypothesized model. Findings After being shown credit card cues, spendthrift participants had more spending-related thoughts and less debt-related thoughts, perceived themselves as having better financial well-being and consequently spent more than tightwad participants. Originality/value To the authors’ knowledge, this is the first study to investigate the direct link between an exposure to credit card cues and perceived financial well-being, and one of the few to show evidence of the moderating effect of consumers’ sensitivity to the pain of payment on spending when credit card cues are present. This study suggests that marketers may use credit card cues to promote consumer spending, whereas consumers, especially spendthrifts, should be aware of how credit card cues may inflate their perceived financial well-being and stimulate them to spend more.

The effects of mental budgeting and pain of payment on the financial decision making of socially excluded people

“…The results of the present study add to a growing body of research demonstrating that payment pain discourages hazardous purchase behaviors by mediating the relationship between desires and purchases (e.g., Thomas et al, 2011;Wong and Lynn 2019). Pain of payment mediates by lowering the propensity for risky investments, providing additional evidence of pain of payment having functional benefits.…”

Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

“…There is also extant research on the link between credit use and spending behaviour. For example, the credit card effect, whereby consumers will spend more when exposed to certain spending stimuli [94][95][96], a similar effect to that found for over-consumption facilitated by BNPL [81].…”

Consumer’s subjective financial well‐being: A systematic review and research agenda

“…On the contrary, having a student loan in itself may not lower the FWB of college students, but borrowing from multiple sources (federal or private) may (Robb et al, 2019). The credit card cues used by credit card companies can sway them to spend more than their earnings, thereby decreasing their FWB (Wong & Lynn, 2019). The absence of delayed gratification traits can be detrimental to their financial habits (Norvilitis et al (2006).…”

“…Figure 1 shows all of the article counts over the years (longitudinal) from both marketing and non-marketing areas of consumer Wong and Lynn (2019), Limbu and Sato (2019), Mende et al (2020), Nicolini and Cude (2019), Cook and Sadeghein (2018), Netemeyer et al (2018), Pereira and Coelho (2019), Xiao and O'Neill (2018), Xiao and Porto (2017), Haws et al (2016), Santos et al (2016), Komarova Loureiro andGonzalez (2015), Mende and van Doorn (2015), Postmus et al (2015), Winterich and Nenkov (2015), Norvilitis (2014), Baker and Dumont (2014), Shim et al (2013), Collins et al (2013), Guo et al (2013), Schmeiser and Seligman (2013), Lyons et al (2007), Devaney and Kim (2003), Kinsey and Lane (1978), Bhutta et al (2015), Lim et al (2014), Xiao et al (2014), Tach and Greene (2014), Meier and Sprenger (2013), Donnelly et al (2012), Gutter and Copur (2011), Malone et al (2010), Shim et al (2009), Forry ( 2009), Bonke and Browning ( 2009), Norvilitis et al (2006), Prawitz et al (2006), O'Neill et al (2005, Baek and DeVaney (2004), …”

“…In one of the earliest studies, Norvilitis et al (2003) found that an increase in credit card debt decreases college students' FWB. As an example of college students' credit card vulnerability, one recent study found that credit card cues or the presence of credit card logos can increase the FWB perception of young consumers, so they spend more on their credit card (Wong & Lynn, 2019). Credit card literacy programs can increase college students' confidence and self-efficacy related to using a credit card in the marketplace (Limbu & Sato, 2019 predicts FWB marginally (unstandardized beta < 0.1) and that saving behavior predicts FWB strongly (Gutter & Copur, 2011).…”