How Amex makes you feel rich, or the hidden cost of fancy credit cards

Posted on by Joe Hovde

I got an American Express credit card a few years ago and I’ve been interested in the ways it has pulled at my psychology. There is an explicit cost to the card, which is several hundred dollars per year. But more fascinating and concerning is the implicit cost of spending more than I would have otherwise because having an Amex makes me feel wealthier.

I’ve tried to be self-aware about it, but I believe that having the credit card has impacted my spending habits and attitudes towards luxury goods.

I think as you do things that you identify with wealth, it becomes part of your identity, and then because you want to keep your identity consistent, you do other things that you think wealthy people do. So a night at a fancy hotel today can turn into a luxury gym tomorrow and business class flights the day after that.

Amex seems to understand this quite well and I am sure they realize that their interests are aligned with making me spend more by making me feel like I am part of an upper class. They make money every time I spend money. And, because their brand is associated with wealth, if they can make me dependent on feeling wealthy, I’ll be more likely to keep paying for their credit card for years into the future. Inflating my sense of wealth makes a lot of sense for Amex.

These are the tactics they use that I find most effective.

  • A heavy metallic card. This is such a silly branding thing that still works on me and makes me feel a mixture of importance and embarrassment when a server picks it up and remarks on it. I hate that my brain is so simple that just holding a heavy piece of metal makes me feel like I’m more powerful than holding a lighter piece of plastic. At least I got a good tweet out of it.
  • Credits to fancy hotels. You get $200 off of hotels on their “premium list”. I imagine this makes sense for the hotels because for most customers this spend will be incremental; they wouldn’t pay to stay at the Ritz Carlton without an incentive to do so. What I have found is that I’ve enjoyed staying at these hotels, and it makes it much harder to book a budget hotel on another trip. More than that, it’s made me feel like I am the type of person that stays in fancy hotels — something I’d never thought before, and makes me more likely to do other fancy things.
  • Credits to Equinox. Just like the fancy hotels, going to a fancy gym becomes part of your identity and it is hard to leave. This is the case even when you are aware that it is happening, and that it’s slightly ridiculous to pay a lot of money for nice lighting and eucalyptus towels!
  • Airport lounges. The exclusivity that these confer makes you feel like you belong to an elite group (especially when you can show it off to a complimentary guest!) Never mind the fact that mostly the drinks are bad and the food is stale and they’re often quite crowded. I notice a feeling of superiority in spite of myself that I don’t want to give up, even if it isn’t really worth the price of the card.
  • Amex’s “Member Since” tagline, which is embossed on the credit card and shows the year you got it. I’ve considered canceling my card in favor of one with lower fees. The tagline underscores the idea of belonging to a club, and being able to afford to belong to this club. And the idea of leaving that club for a cheaper, more sensible club is a bit psychologically painful — it doesn’t fit with the fragile identity of being a wealthy person!

I’m impressed with the power Amex has over my sense of economic success. I can’t know how much more I’ve spent due to this card, but I would not be surprised to learn that it increased my discretionary spending by 10%.

This lesson holds for any sort of big purchase or life decision. It is hard for me to imagine buying an Android after owning an iPhone, and it has very little do with the features. When a part of your identity associates with being a certain type of person, it is natural to want to keep this identity consistent, especially when the identity is aspirational.

I think you can use this phenomenon to your advantage: if you exercise a lot, you probably think of yourself as a “healthy” person and that will make you engage in other healthy activities. But it is good to be careful, especially when you’re dealing with companies that have a vested interest in shaping your identity.

If you liked this, you’ll probably enjoy this post about the Turbotax’s behavioral design. Feel free to reach out on twitter or joe @ this website with any questions or comments!

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