This page says: “The APRs for unsecured credit cards designed for consumers with bad credit are typically in the range of about 25% to 36%.” That’s not too far from 40%. If you have almost no money and would otherwise need such a loan, taking $100 now may be reasonable.
There are claims that “Some 56% of Americans are unable to cover an unexpected $1,000 bill with savings”, which suggests that a lot of people are indeed pretty close to financial emergency, though I don’t know how true that is. Most people don’t have many non-401k investments, and they roughly live paycheck to paycheck.
I also think people aren’t pure money maximizers. They respond differently in different situations based on social norms and how things are perceived. If you get $100 that seems like a random bonus, it’s socially acceptable to just take it now rather than waiting for $140 next year. But it doesn’t look good to take out big credit-card loans that you’ll have trouble repaying. It’s normal to contribute to a retirement account. And so on. People may value being normal and not just how much money they actually have.
That said, most people probably don’t think through these issues at all and do what’s normal on autopilot. So I agree that the most likely explanation is lack of reflectiveness, which was your original point.
This page says: “The APRs for unsecured credit cards designed for consumers with bad credit are typically in the range of about 25% to 36%.” That’s not too far from 40%. If you have almost no money and would otherwise need such a loan, taking $100 now may be reasonable.
There are claims that “Some 56% of Americans are unable to cover an unexpected $1,000 bill with savings”, which suggests that a lot of people are indeed pretty close to financial emergency, though I don’t know how true that is. Most people don’t have many non-401k investments, and they roughly live paycheck to paycheck.
I also think people aren’t pure money maximizers. They respond differently in different situations based on social norms and how things are perceived. If you get $100 that seems like a random bonus, it’s socially acceptable to just take it now rather than waiting for $140 next year. But it doesn’t look good to take out big credit-card loans that you’ll have trouble repaying. It’s normal to contribute to a retirement account. And so on. People may value being normal and not just how much money they actually have.
That said, most people probably don’t think through these issues at all and do what’s normal on autopilot. So I agree that the most likely explanation is lack of reflectiveness, which was your original point.