My theory is that those who use credit cards exclusively to buy everything, even if they pay off balance in full at end of month, invariably spend 10-20% more over the course of the year on discretionary (such as food,
how is food "discretionary"?
Clothing too, if you really want to nitpick.
I guess I had the silly idea that people spend more at the grocery store when they have a large credit line, or buy that extra item of clothing, etc. But I guess we're all spartan spenders around here, right?
But I'll be more semantically rigorous in the future, I promise.
Ok... so I spend more at the grocery store when I have a credit card on me than $20. True. Not because I splurge on the most expensive food I can find. I buy the food I am going to buy. I just buy more of it. So it lasts longer. If I spend twice as much each trip, but I go half as often, I am not really spending more, am I?
The study about McDonalds is another example - people spend twice as much per trip, but they are getting twice the calories, so they gan go longer before the next meal (or the next meal is smaller) and the effect cancels out in the end.
If I buy more clothes, but now they get rotated more and last longer, so I don't have to go clothes shopping as soon, it all balances out. The only way one could actually spend more TOTAL by spending more per trip is if they just threw out a bunch of food or clothes every month so that they could buy more.
Granted - some people actually DO throw out perfectly good clothes just so they can buy more, but is that really an issue of plastic vs paper?
For actual discretionary spending this may be true. However, the truly Mustachian will tend to have very low to no discretionary spending. This also may vary significantly depending if you are one who pays your card off in full every month, and if you look at your statements and/or budget. I can't find the original study, so its unclear if these variables were addressed.
Perhaps many people do make a card abstract and "feel" paper money leaving. Also possible its just that if you only have $20 in your pocket, thats the most you can spend at one time. The former wouldn't surprise me though - people are stupid. People make ALL SORTS of logical fallacies, but that doesn't mean they can't be avoided, with a little awareness.