Plastic debit or credit cards: nearly everyone has one, most likely several. And much research has been done on the subject of card use and how it has changed the way people spend. You may have heard, for example, about the pain of paying – and how plastic cards reduce it, making it even easier to spend your hard-earned funds.
It achieves this both because you’re not actually handing over physical cash, and because it severs the moment of consumption from the moment of making the payment – sometimes the actual payment doesn’t happen until long after you’ve enjoyed your purchase. It’s not hard to see how using cards might mean you spend more, ultimately, than you’d like.
If you have to think long and hard about the money you need to spend for something, it is going to hurt much more than if you had bought it on a whim. In short: to be deliberate is to experience pain, which is likely to curb the temptation to buy – potentially saving money.
Paying has since become even easier. Once you needed a signature for each card purchase, and now the personal identification number (PIN) used with cards is not needed either. What happens when all we need to do to make a purchase is simply wave our card near a machine or tap and go?
Do you know what you’re spending?
Mastercard surveyed its card customers in 2012 and found that spending on their cards had leaped 30% in just one year after the customers went contactless. You could argue, of course, that spending more might reflect economic growth – meaning people could loosen their belts and buy a little more.
However, it’s thought that this increased expenditure is a result of what psychologists call cognitive dissociation. The pain of paying can stop us from spending (too much) money. It breaks the connection between the benefits of spending and its actual cost.
Research in 2001 found that even when individuals were asked to specifically pay attention to the prices of purchases made within the experiment, participants recalled the prices less accurately afterwards if they used certain payment methods. People using cards were much less able to remember the cost of what they had just bought. It seems that when we tap our cards against the machine, our brain just taps out as well.
Coping with contactless
So how can we protect ourselves? Decades ago, most households kept track of their expenditure by writing it all down; in the 21st century many people use computers, such as mobile apps, to do this. For example, in some apps, expenses can be listed as soon as they are made. To gain control, you can put limits on daily or monthly spending.
These limits can be set for you, or simply by limiting the amount of money in the account linked to the card.