Academic

In the context of her commentary on the Federal Reserve's proposed rules to prohibit certain unfair credit card practices, Washington Post columnist Michelle Singletary referred to all credit card users as "suckers--that is, losers."  Singletary compared credit card users to gamblers in Las Vegas, and thus explained that even when you think you can "play and win," "the odds are never in your favor."  As a result, she noted that even if the proposed rules eliminate some problematic credit card practices, the issues involved with using plastic will persist.  In Singletary's view, therefore, there is simply no way to actually "win" the credit card game--hence the loser label.

Singletary's comments sparked a lot of reaction from the many credit card users unhappy with being labeled a sucker.  Potentially the biggest objectors were those who pay off their balances in full every month, sometimes accumulating "reward points" that could lead to free trips or other benefits.  These card users objected to being classified as "chumps" and lumped together with the credit card users who carried over their balances or made late payments and thus got stuck with high fees or periodic rate increases. 

But in an article today Singletary defended her characterization of all credit card users as suckers, including those who pay off their balances every month.  Indeed, she pointed out that according to several studies, credit card usage alters people's spending habits.  Thus, for example, not only do people tend to spend more money when they use a credit card instead of cash, but people also are willing to pay more for the things that they purchase.  Hence, according to Singletary, an MIT Study found that people "were willing to pay up to 100% more when they paid with a credit card instead of a check or cash."  While the notion that relying on a credit card could lead to more spending may seem a bit intuitive, one researcher pointed out that such a notion actually contradicts "standard economic theory, which argues that the method of payment should have no effect on spending."  Thus, even when you pay off your balance every month, it is likely that you spent more than you would have if you'd used cash.

Apparently, people who pay off their credit card balance every month tend to be more financially literate.  So it's little wonder that they'd resist being classified as a sucker.  People's tendency to resist the sucker label also may be reinforced by current marketing related to credit cards.  Like the commercial where long lines of people use their credit cards to the beat of cheerful and "hip" music only to be rudely disrupted by the person who dares pay by cash or check.  In the end, regardless of how one defines it, it appears that using credit cards is costly even for those who thought they were using their credit card responsibly.