Handing over cash causes more psychological pain than using cards, research suggests

Paying cash may be going out of style – but it can be the best way to rein in spending.

Issuing notes and coins causes 20 percent more psychological pain than using cards, research suggests.

Researchers, whose study appears in the Journal of Economic Behavior and Organization, said: ‘When you pay contactless, you can pay in an instant.

‘We find that when people pay with contactless, it hurts less, but they spend more.

‘With cash payments, people experience the pain of loss intensely as they have to check the amount, select the correct notes and coins, hand them over, receive their change and check that the amount they have received is correct.’

They added: “Given the declining use of cash, it is crucial for policymakers to devise tools to help consumers avoid overspending when using electronic payment methods, especially contactless.”

The study of 3,240 people examined whether different types of payments affect the risk of overspending and whether the pain of paying was different.

Economists at the University of Groningen, Netherlands, found that users rated the psychological pain they suffered with a cash payment at 4.1 out of seven, while the pain of a contactless payment by credit card scored 3.4.

The pain of paying is greater for poorer people, and also for those who are overly frugal.

Electronic payments, both online and offline, do less harm than cash payments.

One theory is that with each purchase we constantly track our expenses with mental accounting. If we spend too much, we experience the pain of paying.

Researchers also found that those who use cards experience less psychological pain and spend more on average