#29: A High Price to Pay

Adding an extra dose of behavioral science to your week with our series In a Nutshell— a collection of behavioral science principles, explained in 150 words or less, written weekly by CUBIC director Allison Zelkowitz.

Are you trying to save money for the holidays, a new vehicle, or school expenses?

Do you ever find yourself spending money impulsively on a new gadget, clothes, or an expensive dinner, despite your savings goals?

If so, one of the culprits may be “The Cashless Effect,” which explains that people are usually more willing to pay when they use a credit card or shop online, compared to when they use cash.

When we part with physical money, we really feel the loss – this is called “the pain of paying.”  Handing over a plastic card doesn’t feel as bad.  Additionally, our credit cards let us make spontaneous purchases, since we don’t have to collect the cash first.

To counter this effect, we can:

1.       Take a few days to consider large purchases

2.       Lower our credit card limits

3.       Leave credit cards at home unless we plan to use them