Sunday Star-Times

Cash puts brakes on spending


PEOPLE WANTING to keep a lid on their spending this Christmas should consider leaving the eftpos card at home and carrying cash instead.

Research carried out by Dr Jashim Khan, a lecturer at the AUT Business School, found that people who pay for things with their eftpos card are likely to spend more than those who pay with cash.

Dr Khan undertook a research project that looked at the emotional associatio­n people had with different payment methods and whether that affected their spending behaviour.

It involved focus groups and field experiment­s with more than 240 consumers and found that the way they paid for things had a significan­t effect on how much the spent and the number of purchases they made.

This showed that people had a clear emotional connection to cash, which made them more reluctant to spend it than they would be when paying by eftpos.

‘‘When consumers witnessed the physical value of cash being transferre­d from hand to hand, they became much more aware of the money they were spending than when using debit cards,’’ Khan said.

The emotional connection to notes and coins was based on the tactile experience of being able to handle it and the associatio­n with value this created for people.

‘‘The results clearly showed that the volume and value of purchase in a single supermarke­t transactio­n increased when a debit card was used over cash,’’ Khan said. ‘‘The types of products purchased and the volume clearly altered depending on payment method.’’

The results applied to a wide range of goods bought, including meals, drinks and personal care items.

People were also much less likely to break a $100 bill to make a small purchase.

However, the research also showed that people were reluctant to carry cash because they were afraid of losing it.

They saw cards as a safer payment method and their awareness of electronic fraud was relatively low.

Khan said the difference­s in attitudes to paying by cash and electronic­ally would probably be magnified by new contactles­s payment technology, which allows people to pay for something by merely passing their debit card or mobile phone over a payment terminal instead of having to swipe it.

 ??  ?? Spenders: Card users not so cautious.
Spenders: Card users not so cautious.

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