Review The Research

Edmund wants to know what Dave means when he says people spend more with plastic than cash. Dave references the research that backs this up.

QUESTION: Edmund on Twitter wants to know what Dave means when he says people spend more with plastic than cash. Dave references the research that backs this up.

ANSWER: Just based on research. There are several studies that have been done that show when people spend with cash that they emotionally register the pain, and they spend considerably less. It depends on the item and their spending patterns as to how much they spend less. Twelve to 18% is the average. A McDonald’s focus group, as an example, when they decided to take credit cards years ago, they did focus group studies on card users versus cash users. At that time, the difference was 42%. A person using cash purchased 42% less in a fast-food impulse setting than with a credit card. In a vending machine, it’s 178% more that you spend with plastic. That’s a percentage, and it’s a small amount because it’s a Coke and a candy bar, right? It’s not a lot of money. On other things that are more expensive, the percentage drops down, but generally, people spend more. The pain centers of the brain are activated based on MRI studies when you use cash. They are not activated when you use plastic. You feel pain when you spend with cash, so you have a tendency to spend less. That’s pretty scientific. That was published in Carnegie Mellon magazine, study by MIT.