Being Patient Saves You Money

I’ve always suspected this to be true. It’s widely held that patience is a virtue and know there’s been a study to prove it. (There’s a study for everything.)

Federal Reserve’s Research Center for Behavioral Economics and Decision Making in  Boston conducted a study entitled, “Time Discounting Predicts Creditworthiness.” The premise of the study was to prove that impatient people are more likely to have lowered credit scores.

Study co-authors Stephan Meier, an associate professor at Columbia University’s business  school, and Charles Sprenger, associate professor of  economics at Stanford University were  trying to identify psychological reasons why consumers might default on their  mortgage. Their hypothesis was that people who “discount” time by favoring  immediate gratification over delayed gratification might prove greater credit  risks to credit card issuers and mortgage lenders.

Meier explained the test to, “We told them, ‘Look, you can get a little bit less money now or a little  bit more money in a month.’ We would start at, ‘You can have $49 now, $50 in a  month.’ They would take the $49 now. ‘So OK, what about $47 now, $50 in a  month?’ Then $40, so on and so on until we got to $20 now or $50 in a month.  Then most people said, ‘No, for 30 extra dollars, I’ll wait a month.’

What they found was that impatient people tend to think only about the present and ignore implications of their decisions. Not only did the study show a direct correlation between impatience and poor  credit scores, but the less patient an individual’s behavior, the lower their  credit score. This type of thinking can be directly applied to loan or credit card payments. If you miss a payment, you will have a little more money right now, but you may not consider the potential costs in  the future.

Meier and Sprenger believe that the results of their study would be useful to credit card companies and other lenders in identifying risk. However, it’s also useful to consumers. If you know that you tend to be impatient, awareness of this trait could help you slow down and think about your purchases and financial decisions.

This study will appear in the January issue  of Psychological Science.

Remember, if you want an honest credit card Coors Credit Union offers you choices you can afford.


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