How you pay might influence how you feel


A recent study in the Journal of Consumer Research has found that consumers are more likely to feel positive about a product if they use credit cards, instead of cash, to pay for it.

The study
Previous research has already investigated what's known as the "credit card premium" -- the idea that customers tend to pay more when using cards than when using cash. However, the new study, performed by researchers at the University of Kansas and the University of South Carolina in the United States, has found that the buyer's actual perception of the product changes, depending on the payment method they plan to

Researchers carried out several different experiments. The participants were first primed, using word games, to be in either a "credit card" or "cash" state of mind. For example, in one experiment, participants performed scrambled word exercises that featured either cash-oriented words or credit card-related words. They then were asked to make purchasing decisions.

The results seem to show that, when credits cards are used as the payment method, the buyer is more likely to think about the benefits that the product brings and the advantages to owning such an item, whereas a buyer using cash is far more likely to consider the costs (delivery, installation, price and warranties).

Overall, the researchers found that participants primed for credit card use were more likely to forget more details about a product's cost and were able to identify more benefits. They were also more likely to choose a product that provided enhanced benefits, whereas those primed for cash were more likely to budget and go for the lower-cost version.

A complicated relationship
The researchers noted that the average consumer's relationship with credit cards and cash is developed at a very young age. Past research has shown that credit cards are linked to spending more and achieving a desirable lifestyle. Credit card advertising and the repeated use of credit cards  help condition consumers to believethat credits cards are a desirable way to spend money.

Credit card payments are very quick and easy transactions, made with just a signature or by entering a PIN. Moreover, credit cards bring a buy-now-pay-later attitude. It's much easier to delay the "pain" of payment, as the impact is deferred until several weeks later when the bill arrives. Therefore, the initial use of the product and enjoyment are not linked to the cost, and the buyer is more able to focus on the benefits of what they're about to buy.

Cash, meanwhile, is associated with the pain of payment, as it leaves a much harsher memory of parting with money. This can lead to a negative connotation associated with using cash to pay for products and cause buyers to think harder about the costs.

A more credit-happy future?
As we move towards a more technological society, the decoupling, or disassociation, between costs and payment methods could grow. For example, consider the developments in contactless payment technology and one-click online payments. Shoppers can easily buy things without deliberation -- and may find it easier to remove themselves from the reality of costs. Therefore, technology that makes shopping easier could lead to buyers becoming more focused on the benefits and less on the costs, encouraging much higher spending levels.

See related: UK consumers being extra cautious with credit; Britons have an appetite for debit

Published: 2 February 2012