The pain of paying is one of the oldest and most prominent theories explaining why using credit cards as compared to cash (and back in the day also cheques and pre-paid cards) leads to very different outcomes. Credit cards, as compared to cash, have been associated with a variety of outcomes: increased willingness-to-pay and spending (Prelec and Simester, 2001; Soman, 2003; Tokunaga, 1993), less accurate expenditure recall (Gross and Souleles, 2002; Raghubir and Srivastava, 2008; Srivastava and Raghubir, 2002), reduced impulse control leading to more frequent spending (See-To and Ngai, 2019; Thomas et al., 2011) and debt accumulation (Gross and Souleles, 2002). It has also been found that those who buy products with their credit card feel less attached to those products (Shah et al., 2016), and that the expected use of credit cards for the purchase of a product is associated with increased focus on the product benefits, rather than its cost (Chatterjee and Rose, 2012). Similar effects have been found comparing cash and debit cards, with significantly higher willingness-to-pay with debit cards, even after controlling for cash-on-hand constraints, spending type, price familiarity and consumption habits of the products (Runnemark et al., 2015). Now there are also studies who have looked at newer methods of payment such as contactless card payments and mobile payments. My own PhD focuses on these two methods specifically. For contactless cards, the findings on increased spending and reduced awareness of spending as seen with the credit card persist (James, 2017; MasterCard, 2011; See-To & Ngai, 2019; Trutsch, 2014). For mobile payments there have not been a lot of studies yet. Huang and Savary (2018) as well as Gafeeva et al. (2018) have looked at willingness to pay and found it higher with mobile phones as compared to cash. Two studies (Garrett et al., 2014; Meyll & Walter, 2018) found that mobile payments were associated with significantly higher debt, mainly in the form of credit and other short-term debt. In a conference presentation (no paper available yet), Pisani and Atalay (2019) also found that paying with devices and gadgets, as compared to cash and cards, reduced the pain of paying. And that is what we’re discussing today.
The Theory of the Pain of Paying So there’s quite a bit of evidence supporting the idea that the shape of money matters. Credit cards ≠ cash. Actually, most payment methods ≠ cash. Most (not all, but most) of these studies herald the pain of paying as THE theory explaining the differences in behavioural outcomes when using different payment methods. But before we go any further, it might help if I actually tell you what the pain of paying is. The pain of paying is the label that Zellermayer (1996) gave to the negative feelings caused by spending money. These feelings depend on how well the payment method used reflects value, the physicality of the transaction, and the temporal proximity between the payment and the money outlay. On this account, cash is the most painful method, because it very clearly reflects value (through banknotes and coins), it results in very physical transactions as it is counted and manually handed in, and it immediately results in a reduction of the payer’s monetary resources. Credit cards, on the other hand, do not reflect value, are not used in a way that prominently emphasizes how much is being spent, and often result in deductions from one’s account weeks if not months later. Hence, the pain of paying associated with credit cards may be much lower than for cash. To avoid the associated negative feelings, people may be less inclined to spend money with cash than with credit cards. This theory has been extrapolated to fit not only willingness to pay, but spending, expenditure recall and the variety of other behaviours already mentioned. Additionally, although only tested on older methods of payment (the theory is from ’96), it has also been extrapolated to fit newer payment methods as some of the behavioural outcomes found with those fit the behaviours seen with methods such as the credit card. I for a long time have also thought that the pain of paying could explain most, if not all, differences in behavioural outcomes. However, as I’ve been doing my own research and diving into all the literature surrounding payment methods to finish the PhD to the best of my abilities, I cannot deny the evidence before me. And as a researcher, you need to look at all the evidence before you. So let’s dive into three separate sets of evidence on the pain of paying surveys, priming and neuroscientific studies.
Rating the Pain of Paying In the original work by Zellermayer (1996) (in other earlier work as well), the pain of paying is established by asking participants to rate, often on a -5 to +5 or 1-10 scale, their experiences or feelings. Within Zellermayer’s own work participants were asked to rate the pain of paying before and after payment, before or after knowing the outcome of a purchase (lottery ticket) and before or after consumption of the good. In total he ran five studies of which most showed a significant impact of pain of paying. Zellermayer is by far not the only person conducting surveys on self-reported data. My question is just: does that tell us anything? There is a large literature questioning the validity of self-reported measures within the behavioural sciences (Brener, Billy, and Grady, 2003;Hansen, Larsen, and Gundersen, 2021; Midanik, 1982; Morisky, Green, and Levine, 1986; Perez et al., 2015; see Rosenman, Tennekoon, & Hill, 2011 for an overview of bias in self-reported data). In addition to the questionable validity of some types of self-reported data, the pain of paying is known to be offset by the reward experienced by the purchase of a good/service. Participants are asked to rate their pain of paying often immediately after the transaction (payment) when they know that they are about to obtain their purchase. It is conceivable that participants are unable to disentangle the pain of paying from the reward of their purchase and as such are rating a mixture of the two, rather than identifying the singular effect of the negative emotions associated with paying itself, from the reward of their purchase and as such are rating a mixture of the two, rather than identifying the singular effect of the negative emotions associated with paying itself.
Priming the Pain of Paying Studies have dealt with the issue of the entanglement of the pain of paying and the pleasure of having a good or service. Work by Mazar et al. (2016) primed the pain of paying by having participants go through a non-conscious conceptual priming task, a scrambled-sentences task using somatosensory or affective pain words to make corresponding pain-related concepts more accessible in memory. I vaguely also remember studies that had participants go through their previous expenditures. An exercise in remembering how much you had spent that month already. It was confirmed that this indeed triggered the pain of paying by showing a reduced willingness to pay for further products (I cannot for the life of me remember the reference, so let me know if you do). Both these studies have used a different form of priming to get to the pain of paying. It has to be mentioned that most of Mazar’s work in this domain is priming related. Priming as a method has received a large amount of scrutiny as a lot of priming studies fail to replicate (Locke, 2015). One of the most famous studies that have used priming, specifically with these scrambling sentence tasks are the “old” study, in which Bargh, Chen and Burrows L (1996) demonstrated that activating a trait construct such as “being old” is sufficient to elicit behavioural effects in the absence of awareness: participants who had been exposed to words related to old age walked slower when exiting the laboratory than the participants who had not been so exposed. Shame it didn’t replicate though… In addition to massive issues with priming as a whole, others have asked whether it is truly the pain of paying, rather than other negative emotions associated with paying at play (Santana, 2012). It is also possible that there is the effect of increased focus at play (Magnussen et al., 1991). The reiteration of prior expenses can also function as a boost in mental accounting, during which the participant realises how tight their budget is, increasing their focus on money dwindling and reducing their willingness to pay for further expenses. This would increase the salience of the next spend, but need not increase the pain of paying, if it were to exist. If this is the case the studies on priming pain of paying are priming attention and budget conscientiousness, not the pain of paying, and these results have been misinterpreted.
Scanning the Pain of Paying The most solid body of evidence establishing the pain of paying comes from neuroscience. The OG study in this field was conducted by Knutson, Rick, Wimmer, Prelec, & Loewenstein (2007) and was called Neural predictors of purchases. In this paper participants were put into an fMRI scanner and went through an online shopping task. The balancing act between brain activation in the Nuclear Accumbens (NAcc) which is associated with reward and activation in the insular cortex which is associated with pain could predict whether a product was purchased. NAcc ≥ Insula is purchase, as reward ≥ pain. The reverse would not lead to a purchase. This paper sprang several new directions of research: both Knutson and Rick (and collaborators) have looked further into the individual differences (tightwads and spendthrifts) and people have applied this to include payment methods, to test for the pain of paying in different methods and see whether on a neurological level there is a difference. Issue is, research doesn’t seem to find results in the direction predicted… Research by Plassmann, Mazar, & Rangel (2011) tested several forms of pain: physical (electric shocks) and the pain of paying. They found Insular activity during the electric shocks (the Insular cortex is mainly associated with physical pain, not psychological pain), but did not find it during the payment process during an auction. Individual’s subjective pain tolerance levels (for both shocks and prices) had been calibrated and matches using a BDM auction mechanism, so this effect, if it existed, should have shown up. The real kicker for the pain of paying was work done by Banker et al. (2017) who finds that, when looking at people purchasing with credits (as compared to cash) do not have decreased activity in the rAIC (right anterior insular cortex) but heightened activity in the striatum and VMPFC, indicating no change in pain experienced, but an attention shift towards the potential reward of the purchase. This study does show there to be a differences between payment methods, but not with regards to the pain of paying, but the pleasure of purchasing. Another issue with neuroscience is known as the causal inference issue: a lot of brain areas are responsible for a multitude of things, so how do you pick what you’re seeing? The insular cortex has been linked to an overwhelming variety of other functions ranging from sensory processing to representing feelings and emotions, autonomical and motor control, risk prediction and decision-making, bodily- and self-awareness, and complex social functions like empathy (Gogolla, 2017). So even if it did “light up” during an fMRI task, are we really sure of what we’re seeing?
Conclusion In this article I’ve given an overview of the research on the pain of paying. I think great work has been done, but I doubt whether surveys and priming can truly get to the bottom of the pain of paying as a theory. I put my faith in neuroscientific studies, and hope that good rigorous work can detangle pain from pleasure, as well as finally figure out whether the pain of paying exists to the extent that we think it does. Work by Plassmann et al (2011) and Banker et al (2017) does not seem to support this idea, however. *** If you want the full list of references associated with this post let me know and I’d be happy to send it to you! ***