Niro Sivanathan, associate professor of organizational behavior at London Business School, explains how spending with touchless forms of payment (like a credit card or online) can lead to spending more money than with cash.
Our work was taking the well-established effect of credit card expenditure explained above and extending this work to see if those with lowered self-esteem would find this purchasing platform especially appealing when looking to acquire luxury goods," described Sivanathan. "Our research shows purchasing luxury goods on credit is especially attractive to those who have low self-esteem," he explained in an LBS news release. "These individuals seek to boost their self-esteem by purchasing high-status goods to make them feel better about themselves. The combined effect of low self-esteem, high status goods and the ability to purchase on credit creates a 'perfect storm.' This can be dangerous; consumers with low self-esteem are at higher risk of falling into debt.
It makes sense that people would be willing to spend more when using a credit card than when using cash, because it doesn't feel like they are physically spending as much. However, I would have never connected this idea to the possibility that those with lower self esteem would be more prone to debt. What do you guys think? Why do people with less money spend more?