Handing over cash causes more psychological pain than using cards, research suggests

Paying cash may be out of fashion, but it could be the best way to keep spending in check.

Research shows that handing over banknotes and coins causes 20 percent more psychological pain than using cards.

Researchers, whose research appears in the Journal of Economic Behavior and Organization, say: ‘With contactless payments, you can pay in an instant.

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

‘With cash payments, people experience the pain of loss intensely. They must check the amount, select the correct notes and coins, hand them over, receive their change and check whether the amount received is correct.’

They added: ‘Given the declining use of cash, it is critical for policymakers to devise tools that help consumers avoid overspending when using electronic payment methods, especially contactless payment methods.’

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

Economists from the University of Groningen discovered that consumers rated the psychological pain they suffered from a cash payment at 4.1 out of seven, while the pain from a contactless payment with a debit card scored a score of 3.4.

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

Electronic payments, both online and offline, are less painful than cash payments.

One theory is that we continually track our expenses with mental accounting every time we make a purchase. When we spend too much, we experience pain in paying.

Researchers also found that those who use cards experience less psychological pain and spend more on average