The Value of Cash

Card payments have become very common, but perhaps we should be more mindful when paying by card over cash. A recent study from Professor Shah (from UTSC) shows the correlation between overspending and non-cash payments. What does this imply and what can we do about it?



In a world where traditional wallets are being replaced by card holders, overspending is becoming more and more common. The shift from cash to card payments seems to have unexpected impacts on people’s buying habits.


A recent study conducted by Professor Shah shows how the average consumer tends to value hard cash over other forms of payment. The theory is that people feel a sharper sting when parting with cash compared to when paying by card because there is a tangible object that they part with. It is not rational, but still people feel it. You may have experienced this yourself, but what is interesting is how this mentality of valuing cash higher than card transactions impacts your thoughts on the product itself after buying it.


The experiment by Professor Shah demonstrates this well. She had two separate groups of people buy the same $2 mug, but one group paid in cash while the other paid with debit or credit card. Two hours after the customers bought the mug, she asked the customers to return the mugs for a price they found fair. While the group that paid with cards asked for an average compensation of $3.83, the group who paid in cash asked for $6.71.


The significant difference between the price of the mug set by the two groups demonstrate how people evaluate the actual product differently depending on how they pay. It is a similar concept with thinking a $100 pair shoes must be a better quality than a $20 pair of shoes. Since people value cash more than card payments, the products bought by cash seem to be of better quality. On top of that, card transactions evoke a smaller sense of ownership. When handling cash, the physical exchange causes one to believe “I own this” more so than cards.


These two different mindsets lead to less satisfaction with a product when bought by card than cash. Not only are people spending more, but they are less content with their purchases!


If you find yourself overspending or unsatisfied with your purchases, perhaps it is time to find a strategy to avoid this mentality. A simple solution is to start carrying cash and using it to make small purchases such as coffee. As Professor Shah says, if you want to enjoy really good coffee, pay with cash. Another method that I personally use is to download the app of your bank and set the notification settings so that each time a transaction passes, you are notified of the amount deducted from your bank account. Believe me, it stings to see a notification on your phone letting you know you’ve spent X amount of dollars, but the coffee I drink is always marvelous.


By: Ellen Imamura


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