I have been reading variousarticles online that state that people who pay by credit card willingly pay more for the same goods and services than they otherwise would if they paid by cash.
A few questions: Are there any studies wherein the data contradict these findings? Are there certain personality traits that are more or less likely than others to pay more (or make more impulse buys) just because they’re using a credit card? And finally, what about other cashless purchases, like debit card or gift card purchases? Is it the cashless aspect, or the credit aspect that is making people spend more?
It’s an unanswerable question. I doubt if there is any way to control for it in the methodology. There is no way anyone could reliably know, even the consumer himself, whether he would have bought the same product at the same time if he had to pay for it with a different method of payment.
Of course, there are people who do not customarily carry a card, who have to defer purchase until they have the cash in their hand, and some of them will not return when they have the cash. That would shift the bias in favor of card users buying more than cash users. Common sense wold tell one that, without needing to bother with any polling strategy.
Just from my personal experience, i am much wiser when dealing with cash.
Also, many places even offer cash discounts, so you could say cash users pay less in certain situations.
Also anecdotal experience, but I’ve been to small pet events where someone was selling things for cash or check only. I and others that I chatted with would have purchased something if they accepted credit/debit cards, but we didn’t have cash or checks on us so we didn’t. Sadly those were supposed to be fundraising events, so they really missed out. Much later, I convinced a different group that I was working with to get a Squareup card reader and accept cards and we did make about twice as much money as the earlier group. (I was on the board for both.)
Also, now that I have my own for-profit shop, I occasionally vend at pet expos and the like. Last summer I was vending at one and a few shoppers came by and the first thing they asked me, even before looking at my products, was “do you accept credit cards?” Because some of the vendors weren’t, and too bad for them. I got those sales.
In my personal experience there is no difference. Method of payment has zero impact. The only reason I put most things I buy on a card is for the points. The card gets paid off every month.
For me personally, cash is real money and cards are just fantasy play money that I can use to get whatever I want without worrying about the consequences.
That’s an exaggeration, but not by much.
However, I am well aware that there are a lot of people, particularly young people who grew up in the credit/debit/Internet era, for whom cards are real money, and cash is just that stuff you have in your pockets that you don’t really count or monitor because it doesn’t show up on a screen somewhere, so it doesn’t matter what you spend it on.
The real key is to try to get a sense of your personal approach to spending, and set yourself up to spend within your limits.
Anecdotally, a friend of mine had a busy tattoo shop that accepted cash only. I urged him to accept credit cards, but he didn’t believe it would affect his business, plus it would force him to claim a larger portion of his income for tax purposes.
Eventually he accepted my advise. He had to hire two additional artists to handle the increased business it brought in.
I find that I have a good handle on my balances and make careful rational purchasing decisions on cards so that pay them off each month and my bank balance grows.
Cash, on the other hand, not being on the ledger sheet, feels already spent, and I will blow it on frivolous things the instant it hits my wallet.
Yes. The lower the hurdle, the easier it is to get past, and credit cards represent a lower spending “hurdle” than cash - see much of the above.
Think about how many things are sold in ways that disguise the actual cost, just to get that hurdle as low as possible. Cars and cell phones come to mind - both sold by the monthly cost, not any total price over years. Things sold on a sticker price that is only the beginning of long-term costs (traditionally, a horse).
There’s actually a worse model on the horizon - stores without checkout. Fill your basket, wheel it out the door, have the contents totaled and billed using RFID and similar technologies. No barrier at all except the walk back to the car.
There is a very large segment of the population which lives paycheck to paycheck. I think these are the people who spend more with credit card availability (until they reach their credit card limits).
Most gas stations around here sell exactly the same gas at exactly the same pumps with a higher price for credit/debit purchases. Usually it’s at least 10 cents a gallon. So people who pay by card are willing to pay $1+ not to walk into the station itself.
I have the same sort of feeling about currency feeling as though it’s already spent once it’s hit my wallet. If it’s not in my bank account, it doesn’t actually exist. That’s not to say that I spend my cash willy-nilly (I in fact, only use it at the place that whines when you pull out your CC for a $5 purchase), but that I certainly think of it that way.
I rarely carry more than $50 at a time, usually less than $20. I currently have $1 in my wallet which is more than I’ve had since the year started.
I have no use for carrying amounts over $100 - there’s nothing cash-only that requires that amount, and it just runs the risk of being lost, stolen, or spent.
I might feel differently if I didn’t have access to cards, but that hasn’t been the situation for over 20 years, and at that time I had no money to speak of anywhere.
I usually get C$300 cash out of an ATM at a time. I know that there is a risk of losing it if I get robbed, but touch wood I have never in my life been robbed.
I like paying for small purchases in cash as a little bit of a constraint on my spending. If I have been careless and “nickel and dimed” myself making numerous small purchases then I go WTF! when I realize I have to go to the ATM again. I am happy to pay for larger purchases with my credit card; those I am unlikely to forget about.
Another reason for having cash handy is that it is inconsiderate to vendors (because of their costs) to pay for small purchases with credit. I do admit that that is only a minor consideration (but it IS a consideration) for me.
I don’t have literature citations at hand but my general impression of reports of literature is claimed findings that people spend more money on more goods and services if they use credit cards, not that they spend more on the same quantity of goods and services. At least how you phrased it it sounds like credit cards make you less price sensitive for the same item. I doubt that, whereas it’s pretty straight forward reasoning how credit cards would loosen the purse strings, at least at the margin, to buy more stuff.
Although, personal finance is an area where the average can be particularly irrelevant. I’m financially secure and a natural under-spender, over-saver. If credit cards (which I use for all payments where I can get cash back bigger than any discount the seller would give me for paying ‘cash’) make me spend a little more, that’s fine. And I don’t believe they make me pay more for the same quantity of the same items, even if that’s true for average people. For me I’m a sucker to leave 2% credit card cash back on the table to use cash. YMMV.
Where I live in the US it’s typically .06/gal difference cash or credit at gas stations. The credit card I use gives 5% cash back for gas, which is around .13 at $2.65/gal premium I pay at closest cheapest station. But if I happen to be going to Costco anyway, enough miles out of the way to make a difference, their credit only price is cheaper than anyone else’s for-cash price anyway.
That said, gasoline at least in the US is a product where many people are strangely more price sensitive relative to other things. Leaving $1 on the table at the gas station is one thing if the person is watching every $1 on everything else. But IME a lot of people are all over $1-like differences at gas stations (the station’s price also, even when they are driving farther to get to the cheaper station). But they piss away many times that constantly all kinds of other ways. Of course one is free to be profligate or thrifty with one’s money, and do so consistently or not.
Every time there’s a sharp hike, community boards are flooded with cheapest-gas threads as if two cents now is worth more than two cents was during price lows. And there’s always someone proud they drove 15 miles across town to save that two cents a gallon. But try to point any of this out and you’ll get roasted to a turn.
Also: all gas in the US is actually a penny more than the price everyone notes and speaks of. But that’s as invisible as the arrow in the FedEx logo…
In one of the studies mentioned in the OP’s link, people who were offered the chance to buy tickets to a sold-out basketball game were willing to pay more if they were told they had to pay by card than if they had to pay by cash. In that case, the quantity of goods (the tickets) was identical, but people paying with cards were still willing to pay more.