The Plastic Trap: Self-Threat Drives Credit Usage and Status Consumption

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 predic-tions, 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 con-sume 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. Keywords compensatory consumption, cash versus credit, expenditure, self-threat, status Mounting credit card debt continues to be of significant concern to consumers and policy makers alike (Geisst, 2009; Gross & Souleles, 2002). Although a multitude of factors con-tributed to this rise—including both the increased availability of and consumers ’ reliance on credit over the past few decades—a commonly cited reason in the popular press (e.g., Danziger, 2006; Simonds, 2010) and among scholars (e.g., Frank, 2000; Heffetz, in press) is consumers ’ increased spend-ing on conspicuous, positional goods.1 Conspicuous goods are those acquired not for their inherent objective or subjective value but instead to signal social status (Veblen, 1889/1994). Ironically, a disproportionate amount of such conspicuous spending is commonly observed among the income constrained (e.g., Banerjee & Duflo, 2007; Charles, Hurst, & Roussanov, 2009), those who can least afford superfluous expenditure. Economists have long argued that individuals, particularly those in the lower socioeconomic stratum (Charles et al., 2009), engage in conspicuous consumption to signal (Zahavi, 1975) their status in society (e.g., Frank, 1985, 2000; Futagam