We tend to value items more when we pay with cash because we feel more connected to the purchase. A recent study financed by the Consumer Financial Protection Bureau found that consumers also spend less when they pay with cash, especially when they’re exposed to frequent reminders.




The study looked at 14,000 credit union consumers who had a revolving balance on their credit cards. They wanted to see if financial “rules of thumb” could actually help these consumers lower their revolving credit card debt. They tested two rules: one was paying cash for purchases under $20, and the second was reminding customers that paying with a card can add 20% to a purchase when you revolve that credit card balance. They sent out these reminders via email and banner ads and even sent customers magnets that included one of two reminders:

“Don’t swipe the small stuff. Use cash when it’s under $20.”

“Credit keeps charging. It adds approximately 20 percent to the total.”

The study found that when consumers were reminded to pay with cash, they had less revolving debt six months later. Researchers concluded:

Consumers who received the first rule of thumb had, on average, $104 less in revolving debt six months later; their balances were 2 percent lower than their baseline average.


It might not seem like a huge amount for a six month period, but when you’re paying interest on a credit card balance that you keep revolving, that’s significant. The research supports a 2012 study that found people were willing to spend twice as much for an item with a credit card as opposed to cash.

It goes to show that tiny actions can add up, and a few reminders can help. For more on the study, head to the links below.

An Evaluation of the Impacts of Two “Rules of Thumb” for Credit Card Revolvers | Urban Institute via New York Times

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