You'll Love Your Stuff More If You Pay For It With Cash, Study Says
There are two types of people in this world-those who pay for everyday items with credit or debit cards, and those who pay for them in cash. While both methods come with pros and cons, is one better than the other?
For people who prefer to spend with cards-perhaps to earn rewards, build credit, or to avoid the sting of seeing cash leave your wallet-new research findings may surprise you. The emotional pain we feel when we hand over cash is actually a good thing.
When you pay for items with cash, you're forced to confront the money you're spending and you create an emotional attachment to the purchase, according to a study published recently in the Journal of Consumer Research.
"While the convenience of going cashless is undeniable, it comes with a downside-we tend to value purchases less when using a card than when we pay via the more 'painful' methods of cash or check," said study author Avni M. Shah, an assistant marketing professor at the University of Toronto Scarborough.
Shah experienced this firsthand when she bought a latte with cash because she forgot her debit card one day. On this occasion, she noticed that her drink tasted better. Was it a better brew, or did her cash payment make a difference? This experience inspired her to analyze others' spending strategies.
For the study, researchers sold $2 mugs to two groups; the members of one group paid with cash, while those in the other group paid with card. When researchers tried to buy the cups back two hours later, the participants who had paid in cash wanted an average of $6.71 back; those who paid with a card wanted an average of $3.83 back. Thus, those who purchased their mugs with cash valued them more.
The hypothesis behind Shah's study isn't exactly new. Margarita Valbuena (picture above), a 35-year-old mom and wife from Chicago, revamped her spending habits by using only cash to pay for everything except bills on auto-pay. After just one month, Margarita reported that she valued her luxuries like haircuts and clothes more, and she ended up saving $382.
Shah explained that a cash-only plan might not make sense for everyone, but some sort of notification of payment, like an email reminder of the transaction, is always helpful.
To put it simply, the form of payment does affect the value of the purchase, Shah said. Cash feels the most painful and when you use it, so therefore the purchase becomes more memorable and meaningful. So the next time you head to the bakery for a treat, pay in cash-that cupcake may taste even sweeter!
(h/t The New York Times)
