Short-term Decision Making

The problem with credit cards is that they take advantage of a dangerous flaw built into the brain. This failing is rooted in our emotions, which tend to overvalue immediate gains (like a new pair of shoes) at the cost of future expenses (high interest rates). Our feelings are thrilled by the prospect of an immediate reward, but they can't really grapple with the long-term fiscal consequences of that decision.

Paying with plastic fundamentally changes the way we spend money, altering the calculus of our financial decisions. When you buy something with cash, the purchase involves an actual loss-your wallet is literally lighter. Credit cards, however, make the transaction abstract, so that you don't really feel the downside of spending money. Brain-imaging experiments suggest that paying with credit cards actually reduces activity in the insula, a brain region associated with negative feelings.

Jonah Lehrer
How We Decide