The convenience of paying for our purchases with a debit or credit card may come at a price, according to new research.
When it feels easy to pay for something, it might just make us feel less connected to what we’re buying, researchers say.
“Debit and credit cards rule the marketplace, and while going cashless is convenient, that convenience may come at a price,” said Avni Shah, an assistant professor of marketing at the University of Toronto Scarborough and the Rotman School of Management.
Across two experiments Shah and her colleagues at Duke University and the University of North Carolina-Chapel Hill looked at the potential consequences of paying with cards over cash by focusing on how connected consumers felt towards what they bought.
The first experiment asked participants to buy a coffee mug normally priced at $6.95 for the discounted price of two dollars with either cash or credit. Two hours after the purchase they were then asked to sell back their mugs at a price of their choosing. Despite the fact it was the same mug owned for the same amount of time, those who paid cash wanted nearly three dollars more than those who paid with a card.
“Those who paid with cash also reported feeling more emotionally attached to their mug,” Shah said.
In the other experiment the researchers wanted to eliminate possible reasons for the cash-payers charging more for their mugs because of the effort tied to finding an ATM and paying bank fees, or the added bonus for card-payers earning rewards points for their purchase.
Here participants were given five dollars in either cash or a voucher to give to one of three charities and a ribbon lapel pin corresponding to the charity they chose.
“We found that people who donated by cash felt more connected to their chosen charity than those who donated by voucher,” she said. “Cash donors also reported feeling less connected to the charities they didn’t chose.”
“In other words, paying by cash made people feel more attached to what they bought and less connected to what they didn’t buy,” she explained.
So why is it that paying with cash makes you value something more than paying with a card? Shah says it comes down to something called pain of payment.
“You feel something when you physically part with your money, and there are different levels of pain depending on the type of payment,” she said. “Something tangible like cash will feel more painful to part with than paying by check, which will feel more painful than paying by card and so on.”
The effect extends beyond just cash and credit and includes other mobile forms of payment, such as cell phones, smart watches, and new products like Apple Pay, she noted.
As North America continues to transition towards an ever increasing paperless economy, she added it’s important to understand what the implications of these new payment systems will be for consumers.
“There are shorter product life cycles and if consumers are feeling less connected to the products they’re already buying, just add easier access to credit and higher consumer debt levels and it’s a toxic combination,” she said.
There’s been some positive systems in the marketplace that Shah points to as helpful to consumers, including recent commercials extolling the virtue of cash over credit and mobile apps that remind consumers of when a purchase has been made on their account.
“These should be encouraged because they can help consumers more careful, deliberate, and meaningful purchases,” she says.
The study was published in the Journal of Consumer Research.