Pay Cash, You Feel The Pain

by Sid Kirchheimer

Q. If I pay with cash more often, will I spend less?

A. People typically spend less money when they pay with cash rather than a credit card, gift certificate or scrip such as Disney Dollars at a theme park. Researchers report in the Journal of Experimental Psychology: Applied that when you pay in cash and “can feel the outflow of money,” you have a greater aversion to spending.

The type of cash you carry also affects the “pain of paying.” In a separate study, University of Maryland researchers found that consumers were more hesitant to break a large-denomination bill than to spend several smaller ones. In other words, you’re more likely to want to hang on to a $20 bill than four $5 notes.

Sid Kirchheimer writes about money and consumer issues.

Source: AARP Bulletin.