- Paying with physical bills could help control spending more than with cards
- Research Suggests Using Cash Causes 20 Percent More Psychological Pain
- The pain of handing over money is greater for those who are poor or very frugal
Paying in cash may be going out of style, but it could be the best way to control spending.
According to research, handing out bills and coins causes 20 percent more psychological pain than using cards.
The researchers, whose study appears in the Journal of Economic Behavior and Organization, said: “When you pay contactless, you can pay in the blink of an eye.”
«We found that when people pay contactless it hurts less, but they spend more.
“With cash payments, people intensely experience the pain of loss, as they need to check the amount, select the correct bills and coins, hand them over, receive the change, and check whether the amount received is correct.”
Handing out bills and coins causes 20 percent more psychological pain than using cards, research suggests
They added: “Given the declining use of cash, it is crucial that policymakers design tools that help consumers avoid overspending when using electronic payment methods, particularly contactless ones.”
The study of 3,240 people investigated whether different types of payments affect the risk of overspending and whether the pain of paying differs.
Economists at the University of Groningen, the Netherlands, found that spenders rated the psychological pain they suffered from a cash payment as 4.1 out of seven, while the pain of a contactless debit card payment scored 4.1 out of seven. 3.4.
The pain of paying is greater for poorer people and also for those who are excessively frugal.
Electronic payments, both online and offline, hurt less than cash payments.
One theory is that with every purchase, we constantly track our spending with mental accounting. If we spend too much, it hurts us to have to pay.
Researchers also found that card users experience less psychological pain and spend more on average.