Here's Why Paying With Cash Emotionally Hurts You

This news may change your spending habits forever.




There are two types of people in this world — those who pay for everyday items with credit or debit cards, and those who pay for them in cash. While both methods come with pros and cons, is one better than the other?

For people who prefer to spend with cards — perhaps to earn rewards, build credit, or to avoid the sting of seeing cash leave your wallet — new research findings may surprise you. The emotional pain we feel when we hand over cash is actually a good thing.

When you pay for items with cash, you're forced to confront the money you're spending and you create an emotional attachment to the purchase, according to a study published recently in the Journal of Consumer Research.

"While the convenience of going cashless is undeniable, it comes with a downside — we tend to value purchases less when using a card than when we pay via the more 'painful' methods of cash or check," said study author Avni M. Shah, an assistant marketing professor at the University of Toronto Scarborough.

Shah experienced this firsthand when she bought a latte with cash because she forgot her debit card one day. On this occasion, she noticed that her drink tasted better. Was it a better brew, or did her cash payment make a difference? This experience inspired her to analyze others' spending strategies.

For the study, researchers sold $2 mugs to two groups; the members of one group paid with cash, while those in the other group paid with card. When researchers tried to buy the cups back two hours later, the participants who had paid in cash wanted an average of $6.71 back; those who paid with a card wanted an average of $3.83 back. Thus, those who purchased their mugs with cash valued them more.