Cash, Debit, or Credit: Does payment method significantly affect spending?

Factual Questions
21

But that seems to be a relatively unusual among real life consumer purchases where you’re generally deciding to look harder, go farther* etc. to get a lower non negotiable price or not bothering to. We don’t generally bid on things. It’s the issue with a lot of behavioral science exercises in economics seems to me, how generally applicable?

I guess you could partly conflate the two things. If somebody has say $1.5k cash on hand and sees a $3k sofa I guess you could say they were ‘willing to pay’ $1.5k cash, so having the card might ‘make’ them pay $3k instead. But in reality nobody was selling the sofa for $1.5k, any negotiability of the price is probably in a much narrower range near $3k. I’d put that down to just buying a sofa if you have a credit card which you wouldn’t buy if you didn’t have a credit card.

In general my sense is that the big effect of cards is to facilitate people spending money they don’t have (yet). The effect on people who have the money in the bank and could either ATM and spend it or card it and pay in full at the end of the billing period (as we do 100% of the time), marginal IMO, in either the ‘buy more’ or ‘pay more’ sense but I particularly doubt the latter. I wonder if a study has been done a) truly real world oriented and b) focused on people who never use credit cards to make purchases they couldn’t cover from their bank accounts.

*if that’s not burning up the savings as in the ‘I drove 15 miles to save 2 cents/gal on gas’ case. :smack:

22

Almost all of our purchases are done on a set of credit cards that are payed in full every month.

I sort of have the opposite psychological effect to the one most people are describing here. I track our “net worth” and in particular have high visibility into the more “liquid” accounts (e.g. checking, money, market and credit cards). So I can easily see the net balance of cash in the bank versus the monthly accumulation of credit card debt.

The result is that spending money on the credit card feels like actually spending our real money. But buying say a lunch out of the ~$100 cash float I keep in my wallet doesn’t feel like spending anything. That money stopped existing in my mind the moment I withdrew it from our account and put it in my wallet.

Not rational I realize. But there you go.

23

I used to do this when I was a teenager. It was far more about extending the middle finger to the higher-priced station than it ever was about saving money. That, and when I first got my license, driving around aimlessly was still fun, so the trips were never “wasted.”