Credit Cards Cost, No Matter What

I should have known: Call people suckers and they'll take offense.

A number of folks were either confused or offended when I said recently that we are all suckers -- that is, losers -- when we use credit to pay for services and goods.

I offered that view while reporting on a proposal from the Federal Reserve and two other banking regulators to curtail or ban certain credit card industry practices.

"I'm very perplexed," wrote Tim McCune of Germantown. "If we pay off all monthly credit card balances, used primarily on utilities, other monthly expenditures and Internet purchases . . . and we get affinity benefits, how am I losing money and why are we 'suckers'? Haven't you cast your victim net too widely?"

Others were equally convinced that their credit card use was completely controlled.

"I do not understand your argument that anyone who uses credit cards is a chump, even if they pay their balances off in full every month," another reader wrote. "I can assure you that I make the same purchases and contributions, with credit cards, that I would make without them."

I'm reasonably sure that many people do not make the same purchases when they pay with plastic. This isn't just a feeling or anecdotal evidence. Researchers have found that people's willingness to purchase more products or services increases with the use of plastic.

In their groundbreaking research, Drazen Prelec and Duncan Simester of the Sloan School of Management at MIT found that study subjects paid more when instructed to use a credit card rather than cash. In fact, they found that people were willing to pay up to 100 percent more with plastic.

So have I thrown a net too widely in arguing that we are all suckers, even those of us who faithfully pay off our bills every month?

Nope. Net tossed just right.

You have to admire the marketing might of credit card issuers. They have done an outstanding job in persuading otherwise smart people that using plastic can come with no price.

Oh, there is a cost. You may be able to bear it, but there is an extra cost.