In a street interview about the economy in today’s Turkey, even when a 10-year-old boy is handed a microphone, he can have an idea about the economy. So, money-related issues are now on everyone’s agenda, from seven to seventy. So how come we are usually broke at the end of the month?
As we said, one of our biggest agendas now is money. In these times when everything is getting more and more expensive, use our money more wisely started to gain importance. Even though methods based on saving are tried to be applied, we usually run out of money when we reach the end of the month.
Apart from special reasons, there is a situation that economists count as the main reasons for this situation to occur: Cashless Effect.
First of all, what is Cashless Effect?
“It’s like spending money on a credit card. the feeling that the money is not going away from me i’m gettingWe’ve heard the phrase “. Cashless Effect, which is defined by economists, explains exactly this situation. Cashless Effect is the case if you don’t have cash at a time when you need to pay and instead of payment by credit card It comes out if you choose to do it.
If you prefer a credit card even if you have cash, and you feel more comfortable in this way, you are in the Cashless Effect because you do not physically see the cash outflow when you pay with a credit card. At the same time, if you are shopping Prefer credit card over cash You may tend to spend more money.
Why is it easier to spend non-cash money?
Today, due to the development of technology, banking transactions are more to digital payment headed. As we explained while describing the Cashless Effect, spending is easier since we do not physically see the money outflow when purchasing something.
For example, you will buy a television and the price of the television is 5 thousand TL. If you are told that you have to pay in cash, you will probably refuse to buy this television, but you will receive it under the name of the convenience of paying with a credit card. installment vs. like If they agree to provide opportunities, your chances of buying the TV are very high.
What do studies say about this effect?
The Cashless Effect was first described in 1979 by an economics theorist who believed that people tend to spend more when they pay by credit card rather than cash. Elizabeth Hirschman reviewed by He sent field officers to the branches of a chain of stores to investigate customers. Shoppers were asked what they bought and which payment method they used.
The result of the research was as expected. Top spenders customers paying by card. Hirschman, in the continuation of his research, revealed that credit card users are more interested in the features of the product rather than the price of the product and reduce the anxiety about spending money. Of course, when the anxiety of spending money decreases. free at the end of the month stay was inevitable.
What could be the consequences of Cashless Effect?
The biggest and most devastating result of Cashless Effect is of course. increase the propensity to spend money it could be. We often forget that a credit card has a limit and we have to pay it back later. Therefore, we may be in debt without realizing it.
Apart from the financial implications of course mental and physical may also have effects. Studies show that people who have debt are more likely to have debt than people who don’t. from anxiety and depression twice as likely to suffer.
Apart from individual results, of course, there are more mass results. Cashless Effect increased especially with the effect of the pandemic period. The use of cash in the world is decreasing day by day. As a result of the increase of Cashless Effect, individual debts increase and therefore consumer debts in countries also increase.
As mentioned before, the higher the debt, the higher the person’s susceptibility to mental illness. In the long run, this situation actually healthcare costs will rise means.
So what can we do to block the Cashless Effect?
Frankly, there is only one viable way to get rid of the Cashless Effect for sure: stop paying with a credit card. However digital age In today’s conditions, this is not possible and does not seem realistic. In fact, there were many stores that closed cash sales during the pandemic period. Well, although we cannot eliminate the Cashless Effect, what can we do to reduce it?
We can use savings methods that help us avoid overspending in general. These are the methods before you build a budget or buy something big. detailed budget planning may do.
In order not to spend too much on the credit card, we should do our spending according to the money in our account, not according to our limit. To be more suitable for our monthly budget our credit card limit We can even drop it.
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