I’ve never heard anybody say they owe their financial success to credit cards or the free airline miles they racked up using them.  It seems everyone is planning on “mastering” their finances by using 0% interest credit cards and free points or miles.  But how “free” are those points, are you really getting your moneys worth?  Obviously the credit card company is not going to lose money on the deal, even if you have the GM card which saves points and gives you a certain amount off a new GM vehicle.

A study done by Dunn and Bradstreet which found that on average you will spend 12-18% more when making a purchase with a credit card as opposed to cash. They also discovered that the average McDonald’s transaction increased from $4.50 to $7.00.  McDonald’s itself did a study showing that it’s customers spent about 40% more at the register when using a credit card versus cash.  When Dunn and Bradstreet looked at vending machines, the average transaction size nearly doubled.  Another study looked at two groups of people bidding on tickets for sporting events and concert.  They found that those bidding with credit cards bid almost twice as much as those who were using cash.

So while you’re gaining points or cash back at 1-3% on your spending, you’re probably spending 12-18% more than you would have had you just used cash in the first place.