hr: Money

Lots of people are trying innovative ways to save money, and most of them fail. After all, how long can you keep cutting off discount coupons, and finding cheaper and cheaper places to buy gas?

Photo Credit: orphanjones

CNN Money talked to dozens of couples who have been trying out an even more drastic and perhaps innovative way to save cash - Cut out the plastic! Studies comparing the before and after plastic phenomenon have found that people spend upto 30% more cash when they have a Credit card, purchase more non-essentials, and are less price conscious.

The reason is probably that people simply don’t realize how much money flowing out of them. It’s very nice to have the security that a Credit Card provides you with, knowing that you don’t have to exactly calculate whether or not you’re purchasing within your means. Of course, the other reason is you feel there are no restraints on your spending.

According to Richard Thaler, a professor at the University of Chicago Graduate School of Business, having a credit card breaks the link between buying something, and paying for it. Another research concluded that people whose credit lines are higher, also end up having more credit.

This means that the savings that not having a credit card can provide, are mostly psychological. You can save a lot more by giving up your credit card, than you can by pursuing other means. Penny wise, Pound foolish!