Card Use Linked to Overspending
Jun 17, 2024
People are twice as likely to spend more money when paying with card versus cash according to a US study published by Forbes.
The survey of 2,000 American adults found 70 percent predominantly make payments using cards versus 22 percent preferring cash, seven percent digital wallets and one percent buy now pay later. Boomers (born 1946–1964) are also less likely to use cash than younger generations.
58 percent of people said card payments were ‘their prime facilitator of higher spending’, which Forbes attributed to the less tangible nature of paying with cards, ‘which seems to loosen the psychological purse strings.’ It added that ‘the physical act of handing over money may heighten awareness of expenditure.’ 21 percent admitted to ‘often overspending’ when using a card to pay instead of cash.
Cards lead as the payment method of choice, influencing spending patterns from impulse buys to budget management.
52 percent of respondents said they are more likely to make an impulse purchase when paying by card versus 24 percent with cash. 22 percent felt ‘less pain about large purchases’ when using cards rather than physical money.
Further insights reveal that a considerable number of people associate a reduced sensation of expenditure when making larger purchases with cards as opposed to cash. This perception could be attributed to the immediate physical detachment from funds when using cards, as opposed to the tangible exchange involved in cash transactions.
When using cash, the leading category of purchases was grocery shopping, with 37 percent of people using physical money in this segment. Forbes suggests this may be ‘to manage spending or cater to stores that prefer cash transactions.’ Those with lower incomes (under $50,000) were the most likely to carry cash with those earning between $150,000 and $200,000 the least likely.
While these tendencies offer clear benefits to card companies and the businesses most likely to enable impulse purchases, they also underscore the importance of cash to inclusivity—ensuring lower earners have equal access to goods and services—and also to budgeting, especially for younger generations.