Behavioural Science
The Pain Of Paying

The Pain of PayingThroughout our daily lives, we need to part with our hard-earned cash regularly. This is a painful task and something we would all love to avoid, but can’t. And the use of the word “painful” isn’t overblown; fMRI studies have shown that the same areas in our brain that are associated with disgust and physical pain are also active when we spend money.

What is really interesting about this bias is that this “pain of paying” is mediated by how observable or transparent the payment actually is. The more tangible the act of paying for something is, the less we do it. Cash is the most tangible form of payment there is. When we hand over the notes and coins, we can see and feel them.

On the other hand, contactless payment cards and credit cards are less so. Since they are pieces of plastic that we swipe and have returned to us, people consume more when using them. Research has found that the brain areas associated with “the pain of paying” when people pay with cash are effectively deactivated when one pays with a card. Paying with contactless cards and credit cards can also be a very quick behaviour and the payment can be over and done with before we know it, before it’s really processed.

A study in two major apartment complexes in the United States found that people spent less on laundry when their machine accepted coins than they paid with a pre-paid card. Similarly, in another experiment, it was found that when asked to bid on a pair of tickets to a sports event, those who were told they would be paying by credit card bid significantly more than those who were told they would be paying with cash. All these findings provide a solid explanation of why so many people rack up large amounts of credit card debt: If I am paying with a piece of plastic, I am not really parting with my tangible money.

These studies go to show that if you want to start saving and stop using so much money, take money out of a cash machine every week and don’t let yourself pay with your cards. On the other hand, if you are a retailer and want to increase sales, one way to do it would be to ban cash payments.

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