Paying With Cash More Painful Than Using Credit or Debit Card

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Paying With Cash More Painful Than Using Credit or Debit Card

Money is an important thing as it is a currency that is being used for trade / Photo by: ElenaR via Shutterstock


Money is an important item today as it represents the currency for trading. Innovation enabled some people to purchase goods through electronic means. But for those who do not have the luxury of electronic transactions, they need to use hard-earned cash and this makes them prone to a specific psychological pain, according to a new study.

The study was conducted by a pair of researchers at Nanyang Technological University and Western University. Their findings showed that unpleasant psychological pain could be experienced whenever a person pay using cash. They published the results in the Journal of Consumer Psychology.

When Cash Becomes Your Enemy

In economics, cash is a physical form of any currency that represents money. Cash comes in two major forms: banknotes and coins. Investopedia explains that banknotes are the paper physical version of cash while coins are the metal counterparts, which frequently represent smaller amounts of money. However, modern technology enabled cashless transactions through online payments and bank transfers, allowing individuals to pay without handing out banknotes.

Unfortunately, not everyone uses electronic transactions to make payments and purchases. Individuals like babysitters, cleaners, and waiters are unlikely to conduct such a transaction considering their smaller wage, compared to other workers.

Cash is a physical representation of money and it comes in two forms, banknotes and coins / Photo by: IhorL via Shutterstock


A new study discovered that those who pay using cash were likely prone to psychological pain, compared to those who use cashless transactions. The study was more specific to the correlation of that pain in increasing one's savings for the future.

"These people are at a chronic disadvantage when it comes saving more money for the future," said Rod Duclos, the corresponding author of the study and a marketing researcher at Western, quoted Science Daily.

Because individuals who pay cash suffer from psychological pain, they have a tendency to feel less motivated to spend money. This can have a direct influence on improving their savings or to their ability to buy things, which may impact the economy as reflected by a recession.

Cash vs. Dematerialized Money

In order to understand how spending with cash impact people, the researchers conducted a series of experiments involving cash and dematerialized money like debit and credit cards. The team wanted to understand the decision-making of people when completing transactions using both forms of money.

In the first experiment, researchers recruited participants for a rewarding task. One group was instructed to complete a word puzzle to get $5 in cash, while the other group was asked to do the same but would get the amount on their university debit cards.

Once the task has been completed, researchers asked them if they could either walk away with $5 or return later to receive $7 instead. About 78 percent of participants in the debit card group chose to come back for a higher reward. But only 49 percent of participants in the cash group chose the same offer.

The action from the cash group was interpreted as being impatient. They rather get the money now than wait a little longer to get a bigger amount of cash. It showed that the quick availability of cash might influence decision-making.

Researchers conduct tests about to know the person's movements when handling cash and handling money from a card like credit and debit cards / Photo by: Teerasak Ladnongkhun via Shutterstock


In the second experiment, researchers attempted to influence participants of the cash group to be more patient in the exchange of a better reward. They used a mindset about protection to instill patience in the participants. The cash group members were asked to write a single item that assisted them in preventing any undesired outcomes, for example, a bike helmet to protect their head.

After the mindset has been instilled, researchers offered the cash and debit card groups of the same reward options. Surprisingly, the cash group changed their mind and opted to get the money later. Their new score was nearly equal to the debit card group.

Duclos explained that if a person has been put in a mindset, which helps them focus, they are likely to be more prudent and less impulsive in making a decision. The mindset supports them to think clearly and expand their horizon, instead of just thinking what is here and now. The mindset assists as well in enhancing the person's tolerance to the psychological pain caused by parting with cash.

Their study findings remain relevant today even if many individuals have turned to electronic transactions. In the US alone, 10 to 20 percent of workers are still paying using cash and are getting paid by cash, rather than through electronic cards. If assessed in other countries like India, the percentage of workers being paid in cash is at least 90 percent of workers.

Why Someone Has to Realize the Pain from Parting With Cash?

People who pay with cash has no choice when it comes to bills, groceries, and other necessities. But they have a choice if the money is to be used for investment or savings. The two latter options can be initially viewed as a cost that will slice their salary. As such, they are likely to react negatively toward making an investment or saving their money in the bank.

If someone recognizes the psychological pain from parting with cash and learns how to channel proper motivation, they may be able to see the larger picture linked to their own future. For instance, if they make an investment, like putting up a small business or purchasing a permanent asset, the motivation can help them see the much bigger reward.

The same thing goes when saving their money in the bank. Their motivation can help them learn that saving money in the bank is rewarded by interest. It may also orient them about electronic transactions.



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