Action Line: Easier payment methods tempt card-holders to rack up debt
BY PHIL MULKINS World Action Line Editor
Friday, June 15, 2012
6/15/12 at 5:17 AM
Dear Action Line: It's a really bad idea to have these contactless payment devices with "radio frequency identification" chips in credit cards and smart phones such that all you have to do to buy something is wave the device over a payment terminal. It got too simple to go into debt just with cards you swipe through magnetic readers. We're doomed and here come the device-junkie Gen-Yers. - D.O.D., Tulsa.
It's a given that the easier the method of payment, the more consumers tend to spend. Research by MasterCard released May 3 - tulsaworld.com/MasterCardwavepay - shows that within 12 months of getting a "contactless payment device" study subjects had increased spending by 30 percent.
"Contactless payment methods are becoming more common. Visa recently introduced PayWave; MasterCard has PayPass and American Express has Express Pay. The MasterCard study predicts 150 million mobile devices will be contactless enabled within the next few years," said Bill Hardekopf, CEO of LowCards.com.
The MasterCard study took some MC customers and divided their accounts into low, medium and high spend segments based on their monthly spending habits. After introducing the contactless payment methods, a 30 percent increase in spending was consistent across all three segments.
The study also found that after the first contactless transaction, users spent an average of 25 percent more online, 64 percent more abroad and 20 percent more in recurring payments, said Hardekopf.
"While this increased spending may be good news for banks and retailers, contactless payments can be dangerous to the household budget. You can now make a purchase with just a wave of your phone without a thought about how much the purchase really costs. It could make it too easy for some people to buy something spontaneously or throw a few more items into the shopping cart. Making good spending decisions takes analysis and discipline. We probably need to feel the pain of money leaving our bank account to help us evaluate whether or not we can afford it and if we really need it," he said.
Tips for making contactless payment: Remember the rules of credit cards and debit cards still apply. If your account runs through a credit card, pay it off completely on time each month. If you can't afford to pay cash for it now, you can't afford it with contactless payment. Responsibly using contactless payment takes discipline. Think about every item you purchase as if you are paying cash. Write down each purchase in a notebook so you can keep track of where your money goes, said Hardekopf.
Original Print Headline: Easier payments can make you spend more
Submit Action Line questions by calling 918-699-8888, emailing phil.mulkins@TulsaWorld.com or by mailing them to Tulsa World Action Line, PO Box 1770, Tulsa OK 74102-1770.