When self-esteem is threatened people reach for the credit card

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The plastic trap: Self-threat drives credit usage and status consumption

From Social Psychological and Personality Science 

This article reveals that when a person’s ego is threatened they sometimes repair their self-worth by purchasing luxury goods and they are more likely to make those expensive purchases on credit. The researchers had people work on an ambiguous computer test, and then told half of them in a scientific-sounding way they are not very smart, they told the other half that they had displayed a perfectly fine performance. When asked how they might pay for “a consumer product that you have been considering purchasing,” people who’d had their ego threatened were substantially more likely to say they were planning on paying on credit. In a follow-up study, researchers asked 150 college students to think about buying a pair of jeans. Half were told to consider a pair of exclusive, high status designer jeans, while the rest were told to think about normal, everyday jeans. The students then went through the same computer test, and were told they had done poorly or well. The self-esteem threat made people willing to pay almost 30% more for the luxury jeans, and were more than 60% more likely to intend to purchase the jeans with a credit card. The research concludes that seeking luxury after threat, is a normal response. These studies are part of a psychological account of how relaxed lending policies—for example high interest mortgage offers aimed at consumers of low socioeconomic status—can have disastrous consequences.

Abstract

Conspicuous consumption and its accompanying debt played a critical role in crippling global financial markets in 2008. Although a confluence of factors contribute to hyper-consumerism, the authors explore the potential role of two psychological forces—the desire to combat self-threats through compensatory consumption and the relatively pain-free experience of consuming on credit—that may have interactively contributed to the pernicious cycle of consumption and debt. Consistent with their predictions, the authors find that self-threat sways individuals to consume with credit over cash (Experiment 1) and the interactive effect of self-threat, product status, and payment method creates a perfect storm, whereby threatened individuals not only seek to consume high-status goods but also, when using credit, do so at higher costs to themselves (Experiment 2). These findings have broad implications for consumer decision making and offer psychologically grounded insights into the regulation of lending policies aimed at promoting consumer health.

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Article details
Pettit, N., & Sivanathan, N. (2010). The Plastic Trap: Self-Threat Drives Credit Usage and Status Consumption Social Psychological and Personality Science, 2 (2), 146-153 DOI: 10.1177/1948550610385138

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One Response to “When self-esteem is threatened people reach for the credit card”

  1. Round-up of recent social science research (from SAGE Insight) Says:

    […] When self-esteem is threatened people reach for the credit card (Social Psychological and Personality Science) […]

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