The Credit Lunch

Are students more susceptible to card payment effects?

Posted May 27, 2015

Both conventional wisdom and academic research suggest that credit or debit card use can increase spending. Unlike spending cash, using plastic doesn't feel as much like spending real money: it lessens the pain of paying and makes the depletion of resources (i.e., money) less visible. But card payments don't just affect how much we spend as consumers, they can also influence what people buy, depending on who does the buying.

By virtue of the more abstract way in which they represent money, payment cards have been associated with more shortsighted or impulsive purchases, such as those of hedonic goods – products that make us feel good. Unfortunately, those goods often include unhealthy food or drink choices.

One study conducted by David Just and his colleagues found that students paying with cash purchased healthier food than those paying with an unrestricted debit card. Debit card buyers were significantly more likely to purchase a brownie and a soda and less likely to purchase skim milk or healthy side dishes and desserts.

A more recent publication by David Just and Brian Wansink presented findings of a national survey with 2,314 students at 285 U.S. public schools. The study compared food purchases in schools with debit-only systems to those in schools with both cash and debit options. Results showed that students in debit and cash schools purchase fewer total calories and more fresh fruit and vegetables. The rate of healthy food choices was 42% for schools with cash/debit systems, compared to 31% at debit-only schools. Conversely, the incidence of less healthy food purchases was higher for debit-only schools (60%) than for cash/debit schools (46%).

Evidence in favor of the link between cashless payments and unhealthy food choices keeps piling up like chili cheese fries on dinner plates at a debit-only cafeteria. Research that I was recently involved in looked at the consequences of offering a cashless payment option at a range of different locations and found results about hedonic purchases similar to the ones mentioned above. Interestingly, however, we found this effect only at universities.

What might be the reason for this finding? Is it due to students' lack of impulse control? Perhaps. Impulsivity is generally greater among younger individuals. But the opposite might in fact be true if the personality profile of a tightwad is more prevalent among students than other populations.

Theories suggest that 'pain of paying' is experienced to a greater extent when we make cash purchases. This pain curbs impulsive responses. Research has also shown that individuals differ in their propensity to feel pain of payment. Spendthrifts should experience less of this pain than tightwads. As a result, cash vs card payments should have a stronger effect on impulse control for tightwads. An experiment by Manoj Thomas and collaborators compared total amounts spent on virtue versus hedonic products by participants who were either profiled as tightwads or spendthrifts. They were given either cash or credit card payment options in a simulated (online) shopping task. Tightwads were more likely to buy hedonic products when making card payments than when they had to pay in cash. This difference did not occur among spendthrifts.