By Jonny Lupsha, News Writer

Unnecessary spending has increased since the start of the novel coronavirus pandemic, NPR reported. When facing some kind of difficulty or uncertainty, treating ourselves provides a small comfort—but we should practice restraint. Being smart with credit card use can help.

According to NPR, another side effect of the novel coronavirus pandemic has reared its ugly head: stress spending. “Research in 2019 showed that the average American spends almost $18,000 a year on nonessentials,” the article said. “And nearly one in five says they’re spending more now than they were before the pandemic. Unnecessary spending looks different for everyone, but regardless of your financial situation, we could all stand to stretch our dollars a little further.”

The article goes on to explain that most people indulge in impulse shopping, which is not exclusive to 2020, but has certainly increased, because it feels good in the moment. Comfort shopping can help ease us through a tough time. However, credit card debt racks up quickly.

Using Interchange Fees to Your Advantage

According to Dr. Michael Finke, Professor of Personal Financial Planning and Director of the Retirement Planning and Living Consortium at Texas Tech University, banks make use of interchange fees, which are about 2% of each charge you make. Those charges are paid by the merchant, not the cardholder.

Banks even compete to lower interchange fees, and that competition directly affects the cardholder; so it’s good to do some research on how you can reap the benefits.

“About half of the fees are rebated back to consumers through cash rewards,” Dr. Finke said. “These can include a cash percentage of each transaction paid back to you at the end of the year or points toward gift cards, hotels, or airline travel. The second way these fees are paid back is through incentives to sign up for credit cards.

“A savvy shopper can get between $500 and $1,000 of value for signing up for a reward card, and then get a rebate on interchange fees that can add up to hundreds of dollars per year.”

Kicking the Habit

Understanding that we have a bad habit is the first step to kicking it, and financial habits are no different.

“If we find ourselves in the habit of carrying a credit card balance, we often think that at some point in the near future, we’ll become more responsible and pay it off,” Dr. Finke said. “We assume that we’ll behave more responsibly in the future than we do today. Then when the future comes, we get tempted by the same things that tempted us yesterday, and fall into the same spending habits.”

Dr. Finke said that one solution for the cardholder is to reduce their credit availability. He said it can help to limit ourselves to one or two credit cards, then call up the bank to reduce the spending limit on them. After that, the cardholder can call up the other credit card companies and cancel their cards.

Of course, it may be simple but that doesn’t make it easy.

Another solution is to make each expense more salient. “A psychological problem with credit card spending is that it insulates you from the financial tradeoff you make when you buy something,” Dr. Finke said. “If you spend $200 on a pair of shoes with a credit card, the cost doesn’t seem that real, but if you pay with cash, handing over ten $20 bills is far more salient.

“Experimental studies show that buyers who pay in cash aren’t as willing to pay a higher price for goods and are better able to imagine the other things they could have bought with the money.”

Controlling our impulses, making smart decisions on which credit cards to apply for, and using cash instead of a credit card can help break bad spending habits. A bit of impulse shopping here and there may be fine, but if it becomes habitual, it can spell trouble.

This article was proofread and copyedited by Angela Shoemaker, Proofreader and Copy Editor for The Great Courses Daily.

Dr. Michael Finke contributed to this article. Dr. Finke is a Professor of Personal Financial Planning and Director of the Retirement Planning and Living Consortium at Texas Tech University, where he leads the doctoral program—considered the premier academic program in financial planning. He has doctoral degrees in Consumer Science from The Ohio State University and in Finance from the University of Missouri.