Cash or credit: Exploring the pain of paying
Studies suggest the farther you are away from "real" money, the easier it is to spend it.
When you pay cash, you can "feel" the money leaving your control. This isn’t true with credit cards. Flipping a credit card up on a counter registers nothing emotionally.
Chalk it up to a concept called the pain of paying, says Dan Ariely, the author of Predictably Irrational: Imagine that a restaurant, rather than charge $30 per meal, charges by the bite, with a waiter standing tableside ringing up each morsel. That reminder would make for an extremely unpleasant meal.
In one experiment at MIT, subjects were asked to bid on tickets to a sold-out NBA game. Half were told to pay with cash; the other half could use credit cards. Surprise, surprise: The bids were twice as high among the group that thought they had access to credit cards.
"Credit cards effectively anaesthetize the pain of paying," according to researchers at Carnegie Mellon University. "You swipe the card and it doesn't feel like you're giving anything up to make the purchase, unlike paying cash where you have to hand over bills."
In their study, subjects were each given $20 to spend on a series of products that would be shipped to them. If they didn’t buy anything, they could keep the money.
Using an MRI scanner, the researchers saw that the insula, a section of the brain associated with pain processing, sparked when subjects saw prices that were too high.
This suggests that pricing doesn’t deter spending purely through thoughts of foregone pleasures, as standard economic theory would suggest, but also through immediate pain, the researchers note.
And credit cards help take you just a bit farther from that discomfort.
Are you cash-only or card-only? Or do you mix up your spending? Does your buying behaviour change depending on what you use to make your purchase?
By Gordon Powers, MSN Money
Posted by: John | Nov 8, 2021 3:24:07 PM
I only pay cash for everything I possibly can.
If you use a credit card either you or the store is paying fees (average where I am is $1.50 per transaction plus 2% of the total purchase price)
Some stores and I do not blame them on this one either will charge the extra if you use a credit card instead of a bank card (which still has some fees but substantially lower usually 2-7 cents a transaction) or cash.
Also in my personal experience credit cards with low interest rates like 6-9.9% are gone and now all we have are cards with service fees ,yearly fees and high interest 12-19% on average.
If you want me to start using credit cards again on a regular basis lower the interest rates, get rid of the fees and stop charging us to death for allowing us to help make your company money.
Posted by: know your own financial situation | Nov 8, 2021 4:08:44 PM
I use both PC credit card and cash. Why do I use this particular credit card? I have no interest from month to month (although I still pay most of it off per month) and I get points towards free groceries every month--that works out to between 20 and 40 dollars a month of free groceries. (There are also other free choices from PC, if I so desire.) That is nothing to sneeze at. For the small stuff, like a burger at McD's, I pay cash.
Posted by: Posted Out | Nov 8, 2021 5:22:53 PM
Like the last comment, I too use a combination of PC credit card and cash. I keep a minimum amount of money on hand and use this card to rack up points towards free groceries. My husband inadvertently redeemed $50 in points (which he has yet to hear the end of) but that aside, we still have $200 worth of free groceries waiting for us. We've agreed to save these points for special occasions when we tend to spend more on groceries than originally budgeted (birthdays, holidays).
We make sure to pay the balance in full every month, there's nothing that burns me more than having to pay interest on a credit card purchase.
Posted by: Another PC suporter | Nov 8, 2021 6:21:52 PM
No charege PC card for day to day purchases and Amex card for travel etc... Amex's new Rewards card offers double points on most gas, drugstore and travel purchases as well as one point for every dollar in purchases everywhere else. And yes paying off each month is the only way to go.
Posted by: mark scharf | Nov 8, 2021 6:26:47 PM
I like this article and as a consumer I only pay with a debit card unless I have to use the credit card..somehow looking at all the money in intrest payments has got to me over the years and if not cash then try only useing your debit card ........save the credit card bills for nothing more then emergency purposes only !
Posted by: joey | Nov 8, 2021 7:54:19 PM
I use my credit card for just about everything and every month I pay it off ... no interest fees, my credit card offers air miles and there is no annual fee. Last year I had enought air miles and was able to get a refund on my credit card. So I was paid for using my credit card - again with no annual fees and no interest.
Posted by: AllenMass | Nov 10, 2021 1:49:53 AM
Thanks for the sharing. It define by different ways in many people.
Posted by: John | Nov 10, 2021 8:29:58 PM
I am like Joey. I only use credit cards. I NEVER use cash because it too much of a nuisance. I always pay my credit card balances in full. I have never paid a credit card fee and have never paid interest in the 40 years of using them. I would not use debit cards. I have known too many people that have had their debit cards skimmed and getting their money back was a nightmare. My wife had her credit card skimmed with tens of thousands of $$ spent in 3 days. No problem whatsoever settling this with the credit card company. Just a simple phone call and a form to fill out.
Posted by: Jack | Nov 10, 2021 8:44:14 PM
Jack, I agree about your comment of debit versus credit card. I too had my credit card skimmed. Of course with a credit card, the money isn't withdrawn from your bank account like with the debit card. I also had no problem reporting this to my credit card company, and I did not have to pay anything that I claimed was not my charge. My boss had his debit card skimmed, and he has not yet been able to recover his money. I have read someone's comment about not using credit cards because of the interest charges. Who in their right mind would carry a balance on a credit card??? To those with credit card debts, I should advise using cash, but who am I kidding? Mix the lure of the perceived "painless" use of the credit card with irresponsibility, and you end up with debt.
Posted by: p-nut | Nov 11, 2021 12:49:09 PM
I always pay cash,100% down zero later. I do not like the tracking of your life that can easily be done using credit or debit cards.They (whoever they are) can learn alot about you by following your paper trail.My privacy is more important then airmiles.
Posted by: Cancer | Nov 11, 2021 8:07:08 PM
There is nothing more important than air-miles.
Posted by: arthur | Nov 13, 2021 3:24:20 PM
just because we are being trained to rely on loan-sharks, does not mean it is the best way to go, nor does it mean we are not dealing with loan-sharks.
Posted by: robert | Jan 31, 2022 4:54:31 PM
I recently got a walmart card and was told I had a 500 dollar limit. I got my second bill after and was charged a $10 fee for going over my limit. I had paid the previous bill off whichb only gave me a 300 dollar limit. I havent seen a charge for going over before because they will not let it happen, youre told at the till that your card has been declined. I can live with this. I phoned the company up about this and they said it was in my aggreemnt. I told the lady it was kind of a tax and that I woulnt be using this card no more
Posted by: Thomas | Jun 21, 2021 9:44:04 AM
Well when you play with snakes (aka credit card companies) sooner or later those "Air miles" they use for bait will come back to bait you, sometimes you won't feel it, other times a little more so and when you least expect it, BAM, they get you good.
Been there done that....didn't like it.
In closing, its amazing how people complain about so called BIG OIL, when the BIG CREDIT CARD industries does more harm to peoples lives than BIG OIL ever could. And not to mention make billions more. But hardly a peep.
Posted by: Sharon | Dec 16, 2021 10:28:22 AM
I put everything on my credit card. My bank allows me 10 transactions a month "free", so by the time I pay rent, heat, water, power, cable, cellphone, internet, there's 7 gone. I keep one spot free for "emergencies" (like when the furnace needed fixing), and one spot open incase I need to make a cash withdrawal, the last one is for the credit card payment. I pay in full every month. No fees, no interest. I like the fact that I can track my expenditures/balance online 24/7. I made up a spreadsheet and track my finances there as well so I always know what's coming in and going out :D It makes my life easier and works for me....