It is widely known that people tend to spend more with credit cards than if they use cash. Supposedly this is because you can “feel” cash leaving you.
From a scientific perspective, the paper bills passing through your hands release tiny particles found in the ink used to print money. Those particles travel through your bloodstream, sending a signal through your nerves straight to your brain which responds by releasing chemicals that make you feel remorseful (see diagram, top). The plastic of credit cards does not cause the same biochemical reaction, so you don’t get that feeling of regret (see diagram, bottom).
Okay, I just made up all that crap. But it’s still generally true that most people spend anywhere from 10-30% more when using credit than when paying with cash.
But I’m not most people.
As I’ve discovered in the last week, I tend to spend more when using cash than when using credit cards. And I think I know why:
- Cash tends to come from “nowhere.” I rarely have cash in my possession. If I ever do, it’s not on purpose. Usually it’s a gift or it comes from selling something I don’t need. I view it as extra money, so I’m more inclined to spend it on frivolous things.
- Cash doesn’t make it to my books. Because of the way cash typically enters my possession, I almost never log it in my personal finance tracking application of choice. And I don’t log receipts for transactions I pay in cash either. Thus there’s no line item in my monthly spending report to make me feel guilty for spending $60 in cash on two hot dogs at a baseball game.
- I don’t like cash. Cash takes up precious room in my wallet, and it invariably spawns something I hate even more: loose change. The sound of coins clinking in my pocket–ugh, it sends shivers through me. Perhaps I spend cash quicker because my subconscious is working to get rid of it faster. Of course, I could just deposit it in the bank, but going to the bank is another thing I don’t like doing.
So do you fall into the typical behavioral pattern of spending more with credit cards, or do you part with cash easier like I do?