Use cash – if you want to rein in your spending

PAYING in cash might be going out of fashion – but it could be the best way to rein in spending.

Handing over notes and coins causes 20 per cent more psychological pain than using cards, research suggests.

Researchers, whose study appears in the Journal of Economic Behavior and Organization, said: ‘When you pay contactless, you can pay in a blink of an eye.

‘We find that when people pay using contactless it hurts less, but they spend more.

‘With cash payments, people experience the pain of loss intensely as they need to check the amount, select the right bills and coins, hand these over, receive their change and check whether the amount they have received is correct.’

They added: ‘Given the declining use of cash, it is crucial for policymakers to

‘Going contactless causes us less pain’

devise tools that aid consumers in averting overspending when using electronic payment methods, particularly contactless ones.’

The study of 3,240 people investigated whether different types of payments affect the risk of overspending, and whether the pain of paying differed.

Economists at the University of Groningen, The Netherlands, found that spenders rated the psychological pain they suffered with a cash payment at 4.1 out of seven, while the pain of a contactless payment by debit card, scored 3.4.

The pain of paying is higher for poorer people, and also for those who are excessively frugal.

Electronic payments, both online and offline, hurt less than cash payments. One theory is that with every purchase, we constantly track our spending with mental accounting. If we spend too much, we experience pain of paying.