Cash: A More ‘Painful’ Payment Method?

Researchers have identified a link between method of payment and emotional investment in a purchase. Studies led by Avni M. Shah have found that paying by cash or check (versus credit or debit cards) increases consumers’ emotional attachment to a purchase. Shah, an assistant professor of marketing at the University of Toronto, initiated the studies while at Duke University, working with colleagues to conduct several studies exploring the consequence of paying with cards.

The researchers carried out and published their findings in the February 2016 issue of the Journal of Consumer Research. “The form of payment clearly influences the subsequent value of the purchase to the consumer, even when the objective monetary cost remains constant,” Shah and her co-authors report. “Technological advancements with regard to payment (e.g., credit/debit card, Google wallet, PayPal, and other mobile and online payments) are ever increasing the psychological distance from payment, making spending less and less painful.”

In one study, consumers were sold identical mugs for $2. Half were told they could only pay by cash; the other half were told they could only pay by credit or debit card. Those same consumers were later asked to sell the mugs back; those who had paid by cash asked for an average of $6.71—nearly $3 more than the card-using buyers, who sought an average of $3.83 when selling their mugs.

Another study explored charitable donations: Consumers were given either $5 cash or a $5 voucher and asked to donate to one of three charities previously unknown to them. When asked how connected they felt to their chosen charity, the participants who donated by cash reported feeling more connected to their charity than those who donated by voucher—a finding the researchers found to be particularly interesting since the consumers had not used their own money for the donations.