Whenever we use credit cards to make purchases, we tend to spend more and more generously than when we use cash. Why is this?

The reason is very simple. Maybe you will say that because you can’t see the real cash when you swipe the card, you don’t have the pain of counting money to pay. You only see numbers. Therefore, you will spend more and more money. It makes sense to be generous. However, from a more professional perspective, behavioral economists often use the "mental accounting" theory to explain this type of consumption phenomenon.

People usually put different money into different "accounts", such as "retirement money", "investment money", "hard-earned money", or "money that must not be spent" "Wait, there are many self-labeled "mental accounts" like this, which can be described as diverse; and the value of money in different "accounts" is different in people's minds, and people will overemphasize the money in certain "accounts" The value of money, while overly ignoring the value of money in another part of the "account", often leads to irrational consumption behavior. For example:

"Hard-earned money" and "money won from buying lottery tickets", the money in these two "mental accounts" will have different values ??in people's minds. .

If a part of the money is classified as "hard-earned money", then we will be relatively cautious when spending this part of the money, so that we will be hesitant to consume and timid to invest.

As for the "money won from buying lottery tickets", people will think that this part of the money is obtained from winning the lottery anyway, and it will not be too painful to lose it. It is easy to lead to irrational over-consumption and blind investment. Behavior. In the same way, people feel that the value of money in credit cards seems to be lower than the value of "cash", so people will naturally appear generous when swiping cards to spend. Summary:

Consumption with a card is like not spending your own money. It can also be described as virtual currency. Unlike cash, when the number of banknotes decreases, it will give people a more real feeling, and for virtual currency People often do not accurately measure the reduction psychologically.