>One of the most often cited studies is one conducted by Dun & Bradstreet, where the company found that people spend 12-18% more when using credit cards instead of cash. McDonald’s reports its average ticket is $7 when people use credit cards versus $4.50 for cash.
>Those who were told they would have to pay by credit card were willing to pay more than twice as much on average as those who were told that they would have to pay by cash.
Reward cards and other benefits (such as extended warranties) encourage people to put spending on credit cards. Putting spending on credit cards causes you to spend more. Ergo "those rewards programs get people to spend more money because they get more points."
It's well established that paying with plastic over paper makes you spend more.
>But the most surprising thing about these studies? When I tracked down many of their authors this week, I found that they, too, can’t quite kick the credit card habit. Why doesn’t Joydeep Srivastava, co-author of the Monopoly money study, use a debit card or cash?
>“Mostly because my credit card is giving me lots of miles,” he said
>Once upon a time Mr. Prelec, a professor of economics at the Sloan School of Management at the Massachusetts Institute of Technology, refused to collect frequent-flier miles (or even coffeehouse stamp cards) because he thought they cluttered his decision making... Now, he doesn’t leave home without American Express card. Why not go debit-only? “The rational answer is, it’s the points,” he said, given that few debit cards offer reward points.
So the banks fight with each other offering more points/rewards/etc - meanwhile you pick up the tab.
I wish usgov would look deep into this criminal scheme.