Monopoly money: The effect of payment coupling and form on spending behavior.

Abstract

This article examines consumer spending as a function of payment mode both when the modes differ in terms of payment coupling (association between purchase decision and actual parting of money) and physical form as well as when the modes differ only in terms of form. Study 1 demonstrates that consumers are willing to spend more when a credit card logo is present versus absent. Study 2 shows that the credit card effect can be attenuated when people estimate their expenses using a decomposition strategy (vs. a holistic one). Noting that credit card and cash payments differ in terms of payment coupling and form, Studies 3 and 4 examine consumer spending when the payment mode differs only in physical form. Study 3 demonstrates that consumers spend more when they are spending scrip (a form of stored value certificate) versus cash of the same face value. Study 4 shows that the difference in spending across payment modes (cash and gift certificates) is attenuated by altering the salience of parting with money through contextual manipulations of the differences between cash and gift certificates.

Do Payment Mechanisms Change the Way Consumers Perceive Products?

“…Thus, while differences in the temporal coupling of credit and cash with the pain of payment make construal-level theory an intriguing general explanation for payment effects, we believe that there is still considerable work to be done to assess its viability in this context. Our assumption, and one supported by Raghubir and Srivastava's (2008) suggestion that different schema may develop over time for various payment mechanisms, is that these activated concepts are more closely related to the benefits of products under consideration when credit cards are primed rather than cash. If learning is a key mechanism in the development of different associative networks related to credit cards and cash, it follows that the credit card premium may differ (or even be eliminated) for those consumers whose credit card use leads to traumatic consequences, what Bernthal, Crockett, and Rose (2005) have referred to as the "debtor's prison."…”

“…For example, while credit cards are more decoupled from the pain of payment than cash, they also differ in terms of physical form. Raghubir and Srivastava (2008) argue that differences in physical form or appearance can cause payment mechanisms to be treated either as more like real money or more like "play" money, depending on their physical similarity to cash. Thus, a gift card may be similar to cash in terms of its close relation to the pain of payment (i.e., the cost of goods purchased immediately reduces their value); however, the difference in form makes the pain of payment less obvious, vivid, or transparent.…”

Do consumers pay more using debit cards than cash?

“…Hirschman, 1979, Feinberg, 1986, Prelec and Simester, 2001, Raghubir and Srivastava, 2008, Soman, 2001, 2003, Vandoros, 2012. One strand of this research focuses on the differences between cash and gift certificates ("scrip money"), between cash and pre-paid cards, or between different denominations of cash (Felsö and Soetevent, 2014, Mishra et al 2006, Raghubir and Srivastava, 2008, Soman, 2003, Vandoros, 2012. These studies find differences in spending behavior between the payment method and cash as well as within the domain of cash.…”

Antecedents and Consequences of Household Financial Management in Brazilian Lower-Middle-Class

“…Consequently, individuals that use some sort of credit for payment may consume more. The question arises as to whether this will lead to greater consumption, which in turn causes them to become delinquent (Prelec & Lowenstein, 1998;Soman & Lam, 2002;Soman & Cheema, 2002;Kirchler et al, 2008;Raghubir & Srivastava, 2008;Ponchio, 2006).…”