NEW YORK, U.S. - As opposed to previous reports, now, a new study published in the Journal of Consumer Research has revealed that Americans are more willing to go into debt for experiences, over materials.
The new study showed that when deciding among optional purchases, Americans are more likely to use credit to buy experiences.
It pointed out that the country’s citizens would use debt to buy a vacation, like a wedding, a trip, tickets to a ball game or concert instead of material goods like a new sofa, grills and televisions.
Eesha Sharma, an associate professor at Tuck School of Business at Dartmouth College and one of the report's authors said that this finding is notable because it runs counter to previous research.
Sharma said, “It tells us more about when and why people are willing to borrow."
Before this, researchers have found that people bought material goods, viewed as assets, with debt because they could use the item as they were paying it off.
This is because such goods could retain value or be sold later.
Sharma explained, “We challenge the idea that people are more willing to go into debt for a longer lasting thing.”
However, this new report pointed out that experiences are more likely to have a date-stamp on them than the new television or gaming console you can buy any time.
Stephanie M. Tully, the report's co-author and assistant professor of marketing at the University of Southern California explained, “Because you plan to do something at a specific time, it makes it harder to put off making the purchase until you have more money.”
According to the findings of the study, when study participants were asked about a planned experience like going to Disneyland "on Saturday," people were more willing to borrow for that than buying a smart watch.
However, when the offer was going to Disneyland "sometime," they were no more willing to borrow for that than a smart watch.
It pointed out that people's willingness to borrow for a material purchase, such as an outdoor grill increased due to the experience that one might have with the purchase, even if they expect to own it for a long time to come.
Researchers are said to have explored purchases in thousands of households through data from the Bureau of Labor Statistics.
They also found that consumers who spent more on experiences were also more likely to have greater credit card debt and to have paid more in credit card financing charges.
Sharma said, “Consumers ought to be aware that they are likely willing to go into debt for an experience," adding that they may be familiar with a willingness to borrow for material things, but "they may be unaware that there is a greater willingness to borrow for experiences."