Want to save money these holidays? Pay with cash

26 Dec, 2012
Eftpos or cash?

Shoppers are more likely to spend extra money when paying by eftpos than when paying in cash, according to research by an AUT Business School academic Dr Jashim Khan.

Study details

In the first study in New Zealand into how eftpos cards affect spending, Dr Khan’s PhD thesis set out to examine the cognitive and emotional associations that people have with payment methods, and whether these impact purchase behaviour.

“Payment mode has significant effect on value and volume of purchase,” says Dr Khan. “My research study shows that participants who used debit cards spent significantly higher than those who paid by cash.”

Dr Khan says his study sample demonstrated a clear emotional connection to money when physically handling notes and coins – compared to when paying by card.

“When consumers witnessed the physical value of cash being transferred from hand-to-hand, they became much more aware of the money they were spending than when using debit cards, and so were much more cautious with it,” Dr Khan says. “For example, when participants were faced with the thought of breaking a $100 dollar bill, they were much less likely to buy low value items that weren’t considered ‘special’. On the other hand, no such associations were made with breaking in to $100 in a debit account – suggesting that when paying with money, something of ‘value’ is being transferred.”

To understand spending behaviour in a natural shopping environment, Dr Khan asked participants to provide their supermarket shopping dockets and complete a payment mode perception questionnaire.

What the results said

“The results clearly showed that the volume and value of purchase in a single supermarket transaction increased when a debit card was used over cash. The types of products purchased and the volume clearly altered depending on payment method, including meals, drinks, and personal care."

The study also found that participants were reluctant to carry cash for fear of loss, and regarded cards as a much safer payment method. Interestingly, awareness of electronic fraud was relatively low.

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