When Mirav Steckel opened each of her 15 credit cards, she thought the discounts and rewards they offered would save her money. Instead, her plastic portfolio pushed her into impulse purchases and forced her to reassess her spending habits. "If it was a really bad day at work, my first thought wasn't, 'Oh, let me go home and unwind.' It was, 'I'm going to go treat myself to something that's going to make me feel better,' but it got to a point where I was asking people around me for money to pay my cards off, That's not the type of life that I wanted to live."
Steckel chalked it up to financial illiteracy — she was 18, she didn't know the crushing repercussions of debt, and signing up for the cards was deceptively easy. Now 21, she has a new trick to follow her monthly budget: use cash. Seeing the physical money rather than making a seamless digital transaction has been instrumental to curbing her spending.
Steckel's frictionless financial experience is an example of the bombardment of credit card deals, Buy-Now-Pay-Later plans, and digital personal loans designed to facilitate spending and make it easy to obscure — or ignore — the purchases you're on the hook for. Consumer spending gurus told me that while these products can benefit those who truly need a financial relief, they can also trap people in an endless debt cycle that is difficult to escape. And with the risk of renewed inflation and heightened economic uncertainty, some consumers are more willing to enter payment plans, putting less money down up front in the hope that conditions will improve in the future.
"If I make you wait or if I make you click through a bunch of things or physically pull out a wallet or cash, that will give you all these moments to pause and rethink things, so I want to make it as easy and frictionless as humanly possible." Welcome to the funny money economy, where credit is king and companies excel at making their products so easy to access that you don't stop to think about whether you can actually afford to pay for them.
Maybe you know the feeling: You're online shopping, and you only need that sweatshirt, but when you go to check out, there's a $9.99 shipping fee. If you spend $15 more, though, shipping will be free. You don't really need that jacket that you've been eyeing, but if you buy it, shipping is free. It's a steal. Sure, it's a little more than you'd expected to pay, but if you use a BNPL plan, the first installment fits snugly in your budget, and you can manage the other payments down the line. Congrats, you've been sucked into the funny money economy — fueled by the ease of technology and artful tools to prevent consumers from getting a full grasp on their financial situations.
The modern shopping experience is drastically different from what it was even just a decade ago. It's not only the switch from cash to credit cards, she says, it's also the ability to store your card information on the web and automatically fill it in when prompted. Other forms of payment like Apple Pay make it easy to spend without even looking at the price, frankly, without even really pausing to internalize it. And even if you consider the number on your screen, it may not be the final final cost. "I don't think consumers are doing anything wrong. I think it's just that the systems that are in place are really designed to make spending easy.”
These changes also prey on our brain's desire for instant gratification. Hundreds of thousands of years ago, humans were solely focused on survival. They weren't thinking about what meal they'd have in two weeks. Our brains are still in that mindset. While we can think about the future in an abstract way, our brains don’t excel at factoring in the future. "The part of our brain that wants what it wants when it wants it is so much stronger than the part of our brain that's a brake system that says, 'Wait, hold on, can we really afford it?'"
In addition to the ease of shopping, some companies are using entertainment to pull consumers in. He referenced the TikTok shop, where ads for various products pop up in a user's feed while they're watching videos, and people can purchase them with one click. Or take Disney resorts, where a visitor can tap their wristband or use Disney dollars to make a purchase, leading the consumer to feel like they're using "play money" even as their accounts are slowly depleted.
The mechanisms that make it so easy to spend also make it easy to get access to debt to spend even more. New technology allows companies to instantly approve new customers for credit cards, and there's an expanded availability of specialized cards, like those intended for people with low credit or ones geared toward students with limited credit histories. These lower barriers are helping fuel a record amount of debt. Americans' outstanding credit card balances are up nearly 6% from one year ago. When it comes time to settle up your accounts, companies are making it confusing to get a handle on where you stand. Credit cards have variable interest rates that can go up or down depending on a range of factors, including credit score. By offering rewards, points, and limited-time low-interest rates, a consumer might not realize what they're signing up for until it's too late.