Final answer:
We spend more with credit than with cash because of the sense of detachment from actual costs and the credit system's encouragement of borrowing for significant investments with repayment plans.
Step-by-step explanation:
We tend to spend more with credit than with cash for two primary reasons. First, the use of credit can create a sense of detachment from the actual cost, which can lead to less cautious spending. Unlike handing over cash, where the value is tangibly leaving your possession, using credit can obscure the true impact of a transaction. Second, the credit score system establishes trust between the lender and the borrower, which can encourage individuals to borrow for significant investments like education or an automobile, with the intent to repay the borrowed money in the future.
Overall, the use of credit can simplify making large purchases or dealing with emergency situations, but it's important to manage credit wisely to avoid excessive debt. Moreover, with the promise of being able to repay later, consumers might be more willing to spend money they do not currently have in their bank accounts.