Think before you swipe!
On the face of it, the Discovery Credit Card and Pick n Pay tie up is very attractive; pay for my Pick n Pay shopping with my Discovery Card and get cash back from Discovery every month (depending on my Vitality status of course). And it works – for the past year or 2 we have been getting back a few hundred rand each month. I know that Discovery and Pick n Pay have struck some sort of deal and I know that Discovery’s whole aim is to keep people healthy because this is cheaper than treating sick people…and for many people it appears to work, but when Discovery introduced the Healthy Food offering with promises of even more money back each month I started thinking about where “catch” is… after all, there are no free lunches and someone (probably me) is paying for this “free” benefit.
The answer, I think, lies not where you would expect it but rather in a very interesting bit of research that I discovered one day when reading about debt and credit cards. The research (from the USA ) is that people who buy day-to-day goods with a credit card are likely to spend 12-18% more than people who pay cash. More significantly, people who pay for food (and eating out) with a credit card will spend up to 54% more than those who pay for these expenses with cash. Seem unbelievable? Think about it! When you swipe your credit card, there is no emotional attachment to the purchase – you don’t feel it immediately. In fact, think back to the last time you swiped your card…what was the amount? I have amazed myself with this question. The number of times I have swiped my card, signed and walked away only to think a bit later “what was the amount”? Now imagine if you paid with cash and had to take R1500 out of your wallet (which you had to draw from the ATM)… I bet you would think a bit more carefully about whether or not you actually need everything that is in the trolley. Or think about the following scenario: you are on your way home from work and you need to pop in to buy bread and milk…but you don’t have any cash on you…so you use your credit card instead…but “bread and milk” is too little to put on a credit card so you pick up a magazine, some chocolate, chips and then you pay with the card…see how easy it is to spend up to 54% more? (In fact, the Healthy Food advert itself implies that people will end up buying much more than they need – think about the truck load of food that gets dumped on the lawn.)
I am not against credit cards (they have a place) but debit cards are a better bet (and safer than cash) – you cant spend money you dont have. I am also considering making June a “cash only” month and seeing if I actually end up spending less (I know it will be skewed because I will be more aware of what I am spending but isn’t that the point?)
Think before you swipe!