The Cashless Effect

What it is

Richard Feinberg's 1986 paper in the Journal of Consumer Research reported four experiments and one further study in which credit card cues were present or absent. With the cues in view, spending was more likely, faster or larger, which he read as conditioning. In 1990 James Hunt and three colleagues used the same procedure and found no overall effect, offering either their small, largely working-class female sample or the conditioning account itself as explanations.

In 2001 Drazen Prelec and Duncan Simester found that people told to pay by credit card in genuine transactions were willing to pay more, by as much as 100 per cent. In 2008 Priya Raghubir and Joydeep Srivastava found more spending with a card logo present and with scrip than with cash of the same face value, and found that estimating expenses item by item shrank the card gap. What seemed to matter was how clearly a payment registered as money leaving.

Larger samples tell a quieter story. Yunxin Liu and Siegfried Dewitte ran four studies with 692 participants in 2021 and found no card effect on willingness to pay or basket value. In 2024 Lachlan Schomburgk and colleagues pooled 392 effect sizes from 71 papers and found a small but significant effect, stronger for conspicuous purchases, weaker when spending on others, stronger in periods of economic growth and weaker over time. A 2021 brain-imaging study by Sachin Banker, Prelec and colleagues, with 27 people analysed and described as exploratory, linked card purchases to reward-network activity.

In effect

Paying by card probably raises spending a little, more for showy purchases than everyday ones. The one lever with laboratory support is to make the money visible again by adding up each item before paying, the move that shrank the gap in Raghubir and Srivastava's second study. It has not been tested as a habit.

What it does not say

The doubling of willingness to pay came from one study and should not be quoted as a current effect size. Evidence on phone payment is thin: Liu and Dewitte found no mobile effect in three online studies, and the 2024 meta-analysis found no sign that features of the payment method changed the effect. Whether the decline reflects people growing used to cards, rather than a weak original finding, has not been shown directly. The coffee-shop test reported in The Choice Factory, in which cash payers recalled spending more than they had and contactless payers less, gives no sample size and is unpublished.

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