Leaving the card at home revolutionized her financial life
There are those who opt for an even more radical version of this method: put your credit card in a glass full of water and leave it in the freezer. When you feel like making a purchase, you need to wait for it to thaw. Any attempt to speed up the process in the microwave will result in a broken chip.
However, you don’t have to go that far. To control spending, you can just leave the card at home, kept in a drawer. That’s what educator Caroline Ribeiro did. But before telling her story, it is important to bring some data and studies on credit card usage.
The card is used 35,800 times per minute, according to a 2019 study by the Brazilian Association of Credit Card and Services Companies (Abecs). According to a survey by the National Confederation of Commerce of Goods, Services and Tourism (CNC), the credit card is the main form of debt in Brazil, pointed out as the villain by 79.5% of indebted families.
Economic psychology shows that credit cards encourage spending. The reason is simple: the more virtual the payment method, the less painful the purchase process. Opening the wallet and counting the bills has a much greater effect than swiping the card through a machine. Studies reveal that consumers make larger purchases at department stores when they pay on their card compared to cash purchases – and they tip larger as well.
No wonder that one of the classic studies on the subject is called “Always leave home without him”, carried out at MIT. It demonstrates that your willingness to spend increases considerably when you carry your credit card in your wallet.
The fundamental problem is that the card creates the illusion that you don’t need to have money to get what you want: all you have to do is make the purchase in installments and then you “get it right”. Offers of “10 installments without interest” and “zero down” only perpetuate this view. Retailers do well.
When Caroline decided to control spending, she was already in debt. It decided to implement the 50/20/30 method, in which it divides its expenses into 3 categories: essential, superfluous and debt installments. For those in the red (as was her case), essentials should correspond to 50% of expenses; the superfluous, 20%; and the installments, 30%. (Those who do not have debt can redistribute spending as follows: 50% for essentials, 30% for superfluous and 20% for reserves).
She soon identified that the problem came with superfluous expenses and made the simple but powerful decision to leave the card at home. Caroline still needs a few months to settle her debts, but in just a month she has noticed a sharp shift in the way she spends. The credit card was just for needs and planned purchases. Impulses, on the other hand, were under control – with no way to act when the desire to buy hits, she ends up being “forced” to reflect on whether the purchase really makes sense or not at the end of the day, when she returns home.
It seems like something of limited impact, but it isn’t: in the interview I did with her on my YouTube channel, she tells how leaving her card at home has revolutionized her financial life.
What she did, in practice, is what I recommend for anyone who is struggling to keep spending under control. Leaving the card in storage, just for emergencies and planned purchases, can have a huge impact on your financial life too.