‘Punishing myself would not help’: My credit card was stolen — the thief revealed lots of nasty surprises about my finances

‘Punishing myself would not help’: My credit card was stolen — the thief revealed lots of nasty surprises about my finances

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of “Financial Fitness” articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.

Credit cards are not real, of course, but they get us into an awful lot of trouble.

They are one of the many fictional creations of human beings, along with money, life insurance, annuities, 401(k)s, IRAs, stocks and mutual funds, but if we believe in their existence, use and consequences for misuse, they naturally have a very significant impact on our lives.

Lending and bartering was necessary after the agricultural revolution 12,000 years ago, when hunters and foragers planted vegetables, owned livestock and settled in one place. Now, instead of roaming the forests for food, we roam department stores and surf the internet.

Credit-card debt surpassed $1 trillion during the second quarter of last year, a figure pushed higher by our increasing reliance on plastic and our phones to make payments, as well as rising prices. Another reason: The average American has four credit cards. Gotta love those rewards.

Trust works both ways

I own one measly credit card and pay it off every month. But when it was stolen I used a wad of cash for daily expenses to track my spending — or, more accurately, borrowing — and to experience the sourness of being a little bit poorer every time I handed over my cash.

My logic: The riskiest part of credit cards is you don’t have to think about the bill for 30 days. Indeed, credit-card companies know we’re a high-risk prospect: that’s why APRs are 24.7%, although the delinquency rate is near 3%, down from 6.8% in 2009 during the Great Recession.

That trust (or lack thereof) works both ways: 64% of credit-card users rank features like rewards, cash back, interest rates (a smart move) and other perks more than how much they trust their issuer, according to this recent survey from the Motley Fool. It’s a devil’s bargain.

The other favor the thief did me: I scrolled through my statement to make sure there weren’t any suspicious charges — and resolved to improve my financial fitness and spend less money on New York cabs, whose prices have spiked in recent years and — here’s the big one — eating out.

‘Credit-card companies know we’re a high-risk prospect.’

Punishing myself would not help. Drazen Prelec, a professor at MIT Sloan School of Management, and Sachin Banker, a marketing professor at the University of Utah, conducted a study they said revealed that credit cards trigger a reward center in the brain known as the “striatum.”

Their study, “Neural mechanisms of credit-card spending,” published in Scientific Reports, a peer-reviewed open-access magazine, found that rather than “release the brakes” by easing the pain of spending, credit cards actually “step on the gas” by anticipating pleasure.

The striatum is activated by reward and pleasure, which may also go some way in explaining my food-related credit-card charges. Prelec and Banker used fMRI, or functional magnetic resonance imaging, which measures brain activity using changes to blood flow.

Not all swipes are created equal

Here’s the scary part: The striatum is the same part of the brain that responds to drugs like cocaine and amphetamines. It is also linked to addictive behavior associated with video games and even the instant gratification of swiping left or right on dating apps.

But Prelec and Banker said not all swipes are created equal. “Different digital methods may each shape reinforcement processes in different ways,” they added. “The credit card you use for restaurants and vacations creates a different spending appetite than the card you use to buy gas.”

That got my attention. Naturally, credit-card companies offer lucrative dining rewards, with the Chase Sapphire Preferred Card and American Express Gold Card chosen by some reviewers as among the most generous. They have good reasons to target diners.

This study of more than 3,200 U.S. consumers concluded that, even though debit-card users spend a greater share of their purchases on restaurants, credit-card users spend more money eating out ($29.8 billion versus $25.3 billion for debit cards). At least I’m not alone.

‘You can tell a lot about somebody from their subscriptions.’

In addition to reflecting on my eating habits, after my card was stolen I neglected to immediately update Apple Pay and PayPal with my new credit-card information. As a result, I got a rude awakening: email after email about my many soon-to-expire subscriptions.

Here is my roll call of shame: Netflix Hulu Britbox, Audible, Amazon Prime OKCupid Paramount Plus Criterion, TCM The New Yorker, Slate Plus, and the list went on, totaling hundreds of dollars a year in charges.

You can tell a lot about somebody from their subscriptions. I like movies, popular culture and current affairs; I’m game to have a coffee with a complete stranger with whom I have nothing in common; and if I run out of razors, Prime’s next-day delivery never gets old.

Helped by science and skullduggery 

The longer I delayed updating my various subscriptions, the more emails I got with even more nasty surprises, informing me that I had accounts with apps that I had long thought were deactivated. The most expensive: $30 a month for TrapCall, which screens your calls.

Losing your credit card has pros and cons. On the one hand, it does not in itself hurt your credit score, but it could have a negative impact if bad actors splurge with your plastic. On the other hand, it allowed me to look at my spending habits with an objective eye.

The most illuminating part about my thief’s spending habits: They bought hamburgers and French fries from McDonald’s at 10 a.m. We had something in common. We both liked food, and we were happy to impulsively swipe in order to satisfy our hunger.

Helped by science and skulduggery, my missing credit card made me rethink my reliance on waving my iPhone like a magic wand in restaurants and coffee shops ($9 for that black tea and half a tuna sandwich). Ergo, I resolved to make a long overdue lifestyle change:

Do what the hunters and foragers did, pick up some flint, and cook.

What happens to credit-card debt after you die? Will my mother’s IRA be used to pay off her personal loans?

‘I grew up pretty poor’: I got an annual bonus. After I pay off my credit cards, I’ll have $10,000. What should I do with it?

‘I’m retired and live off Social Security’: Will canceling 10 credit cards hurt my credit score? If so, how long will it take to recover?