Cash Amnesia
gsb.stanford.edu
gsb.stanford.edu
When I pay for something with cash I remember it far more strongly than when I pay with card. I pay with a card all the time and the action is the same no matter the price. I tap it and move on.
With cash I remember having to go get the cash, counting out the right amount at the register, and physically handing it over. And then I notice its absence since now I gave up all the cash I had and need to go to the ATM again. I see and feel the loss more strongly.
You actually lose something physical when you pay with cash unlike with a card. Especially if its a large purchase, I feel the cash loss harder and remember it longer - hard to forget handing over several bills ($50+) for those expensive transactions.
Would they also say they spend cash more loosely than card? That's the phenomenon being described, not absolute preference.
As a compromise I only keep a small amount of money on my debit card. That way I have to keep topping it up, so I get a sense of my spending that way.
Here in the USA, tracking people for profit has exploded, and the benefit is not for the person being tracked.
I advocate cash for old reasons, and new reasons. Use high-tech payments if you like -- do not think they can be mandatory here in the USA.
I sure hope not, but there's been quite a lot of things that have been on the "could never happen here" list that have in fact happened. I have no faith that eliminating cash is inconceivable.
However, when it comes to tracking long term? Cash always seemed to just ...evaporate, out of my wallet where as I can look back and see my credit card purchases and go 'why did I spend that much on that?!'
In my experience, there are two types of people when it comes to money. There are spenders, who could usually stand to cut back, and savers, who could stand to loosen up. I'm definitely in the 'could stand to loosen up' camp. I even went so far a set aside a 'fun money' budget but it mostly goes unspent because my frugality has no chill...
but the downside is that it also makes makes profiling easier for anyone who can get access to your bank statements which not only includes the bank but more critically also walmart or any other place where you shop regularly.
i rather track my spending manually. there are tools that can help with that too, like receipt scanners. granted, it's more work, so one needs to weigh the options. for me though, supermarkets are the last place that i want to be able to track my shopping because most of it happens there.
Some of us have issues with (essentially) self sabotage that way. Some of us have also had issues with people in our lives not so accidentally sabotaging (or stealing) things that way. Come to think of it, I don't know any long term married couples that didn't have one of the two do SOMETHING like that at some point.
The nice thing (or terrible, if you're worried about privacy) about credit cards is you can go back as long as you need and figure out what money went where, from whom.
When cash is gone, it's gone. If someone has to provide receipts/prove expenses to get more, that can be managed. If someone can just pull it out, less so.
Pros and cons either way, of course.
The money still disappears.
No records just makes it easier to be gaslit, or blamed by the actual perpetrator in a court of law.
At least when it’s recorded by a third party it’s harder to bullshit about. Two separate friends of mine had their spouses (when under stress) nearly bankrupt both of them using credit cards they signed up for without their knowledge.
They found them on their credit reports due to something unrelated, and at least was able to track down what had happened. Both wives had been shredding the statements. One had racked up $80k, another $70k.
Personally, I had a large and very vague amount of cash disappear (approx $10k) through likely fake expenses just before getting hit with a bunch of false accusations - when I tried to get away from an abusive ex. Considering I’d been trying to get her to sit down with me and discuss household finances for awhile and how much gaslighting and confusion she was making on the topic (and I really wish I was projecting on this), it was probably a whole lot more. But very difficult to discern.
The legal chaos she created shortly afterwards meant I never could get an answer what happened. And frankly was a drop in the bucket compared to the other damage she did.
Could have been worse - I have an acquaintance who’s husband got a HELOC on their house and then bailed with all the money before she found out. 5+ years of drama.
i don't know how one can protect against that. the only thing i can think of is to prevent anyone in the family from having a high credit limit. or avoid credit cards altogether. but that's much easier here where credit cards are less common.
And in most places, if you're married, legally you can't stop the partner from entering the 'community' into debt like that, or encumbering community property. So to your point, yeah it couldn't be stopped even with bank tracking. But it is harder to do that way.
The most you could do is make the responsible party take on the debt entirely on their own later when the divorce settles, but anyone likely to do this kind of BS will make that a multi-year living hell. It's rarely worth the attempt, as legal fees will often far outweigh any money recovered.
There is a reason that 99% of family law attorneys will tell men to just not get married. For guys, 99% of them will also tell them to just not let women live with them (due to various ways THAT is often used against men), etc. Pre-nups are important and can reduce the damage, but are not bullet proof.
For women, the system does generally favor them - but they can and will be drug through hell if they end up with a problem spouse too. And can end up with life altering debt (problem gamblers being a common pattern), abusive partners they can't get rid of, etc. They're more likely to be murdered in a bad situation too, by a long shot.
If someone has an actual reasonable spouse (and is actually reasonable) but want to get divorced, then it's actually not that big a deal and it can be resolved relatively quickly. And that does happen. But for the most part, most of those people don't end up needing the system anyway - as both people are actually reasonable.
And people who aren't from backgrounds that result in them being blind to signs of real problem behaviors usually see and avoid the really dangerous people anyway before they can get their hooks in.
The best prevention frankly is having two loving, stable parents who raised someone well, to have not been abused as a child, and to be nurtured, etc.. So that someone knows what 'good' feels like, has reasonable role models that cover the common gender setups and models healthy behaviors, etc. It's far from foolproof though, and those situations are actually quite rare. What is common is setups that LOOK like that, but are actually deeply screwed up when you're inside - but in ways the participants can't or won't see.
Folks with NPD, ASPD, and other Cluster B personalities in particular are powerfully manipulative and destructive, and can pretend to be really amazing and wonderful until you're already 'stuck'. Co-dependent behavior is rampant. Etc.
The problem is conscious spending requires more initial setup that a lot of people don't want to do. They don't want to look at their bills and tally up the monthly total, automating that to be paid first, and then looking at their savings/investing/donation goals and taxes/limitations and dedicating certain amounts next per month. That's all too much initial work for them, but once you're on the other side it's glorious. I see how much is in my spending account, and spend it freely if whatever it is matters to me more than just the thrill of spending.
So many are just not honest with themselves and what actually matters to them. They have a huge house not because it makes them happy but because it's what they feel pressured to have. But this is a trick, remaining in this state winds up burning you out so much faster because you are not nourishing what your soul wants. What they actually would rather be doing is travelling the world, and yet they only put aside 1% monthly to a travel fund, and 70% goes to a home they don't care about. They wind up never travelling because they distract themselves with irrelevant things, get burned out at their job, feel like moving cities, etc. It happens all the time!
To make this clear, this isn't about downsizing. If a big home does matter to you, that should obviously take a much larger portion of your monthly bills. But you can't make these decisions without going through that above work honestly.
On the other hand, when I pay by card, I don't analyze the buying decision much, even though it's likely a big purchase.
Lose-lose either way. I had to put a personal limit on the amount of cash and accessible money on cards I hold on my person because of this.
I want to see, feel, know and understand what is happening behind the curtain when it comes to my hard earned assets.
Or perhaps the group of people buying harder-to-justify items tend to be people who don't bother to learn the perqs of credit cards or don't have enough credit, so they'd use cash regardless of what they're purchasing, but they purchase junk, so they end up painting this author's picture either way.
And then if you sign up for a new card, or you cancel a card, some random private company decides to rate you and then banks look at that private company's data to decide whether or not you're a good little consumer worthy of their business?
Credit cards might have been a reasonable idea, but give me direct, free, immediate digital banking and debit cards any day of the week please. The US went "what if we took the worst way to do banking, and made that the default?" and that's why banks don't even handle affordable EFTs themselves. It's the creditcard companies again.
For me, a credit card and a debit card are just different accounting systems for the same thing. Either one has zero interest when I manage my expenditures properly and do not carry a debt. Either one could trigger penalties and/or interest if I outspend my budget.
I still prefer the credit card because of the frequently mentioned difference in consumer fraud protection. My fear is that the credit card providers will eventually erode their protections to match the debit card rather than the converse.
I do NOT want to participate in a system where a chip-secured/card-present transaction is now presumed to be valid and I have a difficult battle to contest a charge. If the card is made that valuable, I would then withdraw from the casual retail marketplace and keep my card locked up in a safe as others have mentioned in other threads.
Congrats on not falling for it; for you, a thousand people who do.
Restaurants and bra stores, for example, also want to keep customers hooked. Does that make restaurants & bra stores predatory? Neither they nor credit card companies are forcing their customers to spend more than they can afford.
The worst part is, as long as it is legal, it just makes sense use it - because most things are the same price either way, so it's essentially a small discount on everything.
So, I simultaneously use it regularly and hope it becomes illegal.
But they're still making money off of someone like me who pays the full balance off each month, because when they give me 2% back, they're charging the merchant 5% or more.
It's kind of a heads-they-win, tails-you-loose situation.
Merchants can already stop accepting credit cards due to the fees. Why don't they? Because it would make their customers mad. Few businesses have customers who are more loyal to them than they are to their own (even minor) convenience. I do have a local restaurant I go to that doesn't accept credit cards and is packed nonetheless, but it's a rare feat. The points have a little bit to do with this, but not nearly as much as the convenience.
What would change is that credit card companies would have more trouble luring people to switch away from their existing card to a new one. But they'd have a huge amount of extra money to spend on advertising to make up for that.
I am also operating on old information, perhaps the law changed and this it varies by state now.
"included provisions which allow retailers to refuse to use credit cards for small purchases and offer incentives for using cash or another type of card."
> Higher cash prices are a violation of the card-holder agreement.
I think what you are meaning is “higher card prices are a violation of the merchant agreement” – so a merchant can't offer different prices for cash payments to account for differences in processing costs or they risk losing their merchant account with the card/payment processing company.
In some places this is no longer legal¹, you'd have to check your local legislation to know what applies in that regard where you are.
Also the reverse, offering discounts for card use rather than cash², is illegal in some places because it is unfair to those without cards⁴.
--
[1] so card processing companies can't (legally) punish merchants for offering a discount for cash
[2] usually because the merchant gets a kick-back from the card payment processor, though sometimes these days it is because cash has become the minority payment method³ and vendors would rather only deal with one so want to further discourage cash
[3] it is worth noting while discussing potential costs or kick-backs for card payment processing, that for businesses the act of dealing with cash has associated admin and/or costs too
[4] which is disproportionately the disadvantaged, because they find it harder to qualify for any card, or can only qualify for one with a monthly charge that they can ill afford
amex takes most if not all the risk in my financial life when it comes to day to day spending. one time i had my wallet stolen and the only thing they could muster was a failed gas station transaction. they didn't even try the ATM card.
i use the free points/perks that the irresponsible idiots subsidize to my own advantage. it's linked directly to my amazon account and shows up as a positive cash balance.
My primary bank account debit card never leaves the safe unless for a specific trip to the ATM etc, even then most of the time i got to a branch directly.
Vendors (ie: Stores, Restaurants etc) will not ever swipe even my debit card first discussed. That goes through Amex or a backup Visa card. Those balances are paid in full monthly via bill pay from the main bank account.
My wife also has a similar auxilliary bank account+debit card with minimum balances but generally also uses Amex or the Visa CC on that account.
So we structure our finances this way
1. Primary Joint Account + Savings - Pay bills out of only. No ETF allowed or ATM allowed in general.
2. Secondary Joint Account + Savings (both his and hers) - use for special uses, ie: Venmo, CashApp ETF, ATM
3. Primary CC accounts - Amex, Visa (his and hers) - used for day to day purchasing. Paid in full monthly via #1.
Credit cards also have some benefits in the case of theft over debit cards, because of how they work.
I specifically dont use a debit card at all and dont carry it. I only have it to pull money out and it stays locked in a safe at home.
CC's allow me to ensure things like Amazon sellers arent scamming you, or worse, random websites with awful return policies. With a CC merchant that have a motivation to work on your behalf (ie: to get you to pay them for the charges).
With a debit card that money is gone and its your responsibility to recoup it or convince your bank to credit you that money back..no thanks.
[1] https://usa.visa.com/pay-with-visa/visa-chip-technology-cons...
how is that "not really"? That's "yeah, because"
Its also why we use 3 banks. So if for some reason 1 bank had some type of incident or the accounts do, we have 2 other options with cash reserves. Though that has not happened to OUR accounts, we have had incidents at our banks (they just didnt affect our account balances)
I did have to recoup stolen money once, but this was quick and straightforward since I am a member of a credit union. Leaving my debit card at home would not have helped, since the thief proved to be my ex-girlfriend!
I have had fraud due to things outside of my control that took hundreds of hours and months to recover from. Some being from family of all things. But an Ebay/Paypal EFT with a previous bank (Suntrust) causing recurring overdrafts and a LOT of effort to get it to stop caused a lot of the afformentioned structure.
We are both fairly stringent on spending, myself having had to crawl out of CC debt, so sticking to budget and keeping spending in check isnt so hard anymore. We definitely still have plenty of other safeguards as well.
For example any loan we "reverse engineer" to design it to a specific payment that sets a budget limit. And for things like cars, we keep that loan to no more than $300/month. And once the car is paid off we continue putting that 300/month into a savings account for repairs and/or down payment on the next vehicle when repairs start to exceed the value of the vehicle.
We also do the same for the kids college funds etc,.
I'd rather control things within my control, e.g., my spending, than those outside my control, like thieves and scammers. So I use my credit card everywhere.
I do the opposite: my main debit card is in my wallet, and is used for almost all purchases. Once it's done, I'm holding the groceries and my money is spent — I don't think about it again.
The credit card is at home, and also in my password manager. I use it for the riskier purchases, primarily airline tickets from non-EU airlines and small European budget airlines, and expensive concert tickets.
As for the original topic, I personally hate seeing the echo of my spending in a monthly statement. It's like making the decision to buy everything twice, even for things that are straightforwardly necessary or prudent.
[0] with the tradeoff of the transaction going in more surveillance databases and being solidly connected to my government-issued nym, of course
Should businesses not be allowed to offer perks to their customers in order to get an edge over their competitors? Your example involving an alcohol shop only seems weird because it involves an addictive substance. I doubt people would describe hotel or supermarket loyalty programs as some "bizarroworld "how is this legal" concept".
Where did you move from that didn't have a private company assess your creditworthiness before issuing you a loan? If each bank/credit card company did so separately, what is the issue with outsourcing it to a specialist?
"Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card. The researchers found that people with the debit card were more likely to use cash to make a harder-to justify purchase (in this case, a party-sized bag of M&M’s). However, those with a prepaid card used it as often as cash to buy the candy."
Doesn't that study control for specifically that counter claim?
If it's a purchase of under $10 or so, I'm exceptionally unlikely to use a card -- and I suspect that most of my impulse/fun purchases (like a foam finger would be if that was my thing) would be in cash for that reason, not because I felt an guilt about them.
In my case, the answer to all the above is "yes", and I found paying with cash is a good way of getting rid of the change that I've built up. Every self-checkout I've come across that supports cash will also support splitting payments, allowing me to pay the rest with credit card.
I also have a corner store that loves to get my coins. I suspect he has to make awkward change more often than a big-box store does because when I pull out my $3 in quarters before breaking out the paper bills he always thanks me for it
Now, if I have cash, it's almost always because I intend to spend it, usually for some purpose or activity or over some time period. It's not going back in the bank. Any left over or if plans change, I'll just spend it on whatever. It's "already spent". If it leaves the bank account, it's gone.
One of the big tricks to getting your budget in check is to pay cash so you can see the money leaving your wallet. Swiping a credit card makes that all invisible
If you spend cash, you don't benefit from any of that and as soon as you forget about the transaction, it's like it never happened. Nothing will be able to help you retrospectively see where your cash is going. You can lie to yourself about it. Charges on a card statement don't lie.
All of the online transaction tracking only helps with purchases that you've already made, so you can say "maybe I shouldn't have done that"...after the fact.
Cash based budgeting works beautifully, but it requires a change from what you're used to and there are certainly trade offs. If you're looking to save money though, cash budgeting is like magic.
If you actually use budgeting tools like YNAB which get you into the habit of spending a couple minutes every morning to confirm and categorize where your money went you end up with all the psychological benefits of cash, it's impossible to forget a transaction, you know exactly where your money went for years, and you end up with even more money due to the credit card rewards. I also usually take that time every morning to pay or partially pay on all my cards to make it even more obvious the cash that is leaving my checking account each day.
You also would have more money in your account if you had been getting the credit card rewards for years and could extend your night without spending more than you have.
I'm sure it could be smarter with automatic parsing and whatnot, but I actually kinda like the manual action. It makes sure I'm aware of everything happening to my bank account. Time spent per day is actually quite low because it's kept updated and there is never any big backlog of transactions. I would say it takes 2-3 minutes if there are any transactions, or zero ofc if I didn't spend anything.
Cash is just pieces of paper.
Vs
“I spent $100 on pizza and beer”
Cash doesn’t sit there in your ledger month after month reminding you of your weakness. Instead you have a generic line-item that doesn’t threaten your ego; it could be anything.
You will never know you spent $1200 a year on junk food and booze. It’s just some vague category you can safely manage.
Credit cards work much better for me.
When paying with card, I leave a paper trail for myself to review later. I can also look at my banking app anytime I want to check how much is left. I actually do that before most purchases that go beyond a few bucks.
I believe you are conflating the goal of "spending less" (which is hard) with a simpler goal "knowing more about how I spent my money" (which is easy). You claim to review your paper trail to gain insights, but again, even if you truly did this consistently (and knowing human nature, I doubt that you do) this in no way means you spend less.
Still, even just the number going down tells me exactly how much money I have spent this month – like looking into my wallet would. But I have the added benefit of knowing what I spent it on even long after the purchase.
I don't always review the paper trail, only if my spending is higher than what I expected it to be. But I always check the balance before any bigger purchase. In both cases, I know to spend less in advance and can make an informed decision.
* I am translating from German here using some quick Google searches. I hope these account types make sense for a US reader.
This is the paper being discussed: https://www.gsb.stanford.edu/faculty-research/publications/p...
For me, I have a Monzo account that I put my monthly "disposable" income in. Monzo is a (mostly) UK digital bank with a good app that gives instant feedback on transactions. This means that after every transaction, Monzo tells me "you have £X left this month". This allows me to regulate my spending (e.g. not buy X until next month) if I've spent a lot of my budget half way through the month. It also means that when I'm spending a lot I can go and look at my transaction history for the last few months and work out where it's going so I know what spending to moderate. With cash that's just a black hole.
Also, I just find cash to be a pain to deal with and have basically eliminated it from my life. You have to regularly visit machines to make sure you've got some, you have to carry it around (notes are fine, coins are annoying), you have to faff when paying to give and receive the correct change.
When I pay by card I have to ask myself: is there enough money in my spending account? Is this transaction going to fail? (I keep that balance low on purpose).
Cash lets me sidestep the accounting: if I have it here at all it's pre-approved for spending. Lower cognitive burden there at the POS = easier to part with.
Maybe that would be different if I did anything important in cash.
I always pay cash at the bar- it's an easy way to realize you're spending too much compared to just opening a tab. Plus you don't get stuck closing out if you wait too long.
*If you're wondering: I have a credit card. I don't really care if some data broker knows that I bought pants or paid my water bill.
I am not aware of a "social credit score" around these parts, but I do not have cards and I do very strictly care that privacy remains respected.
$20 to $50 in my wallet usually lasts me a month or more at this point. There are a few well established bars and restaurants that force the burden on the customer by not accepting cards, but they nearly always have an on-site ATM. Many of them that are not outright amazing and lived on by their reputation from their longevity have started taking cards. Nobody would even dream of opening a new place that was cash only.
This is so weird to me since I want to know how much I spend in any category. I’m annoyed only one of my linked Apple Pay cards reports transactions off Apple Pay (my AmEx).
The study specifically says it looked only at cases where “the payment method hadn’t been decided beforehand” but that strikes me as really weird. Everyone I know knows how they’re going to pay for a purchase before they walk into a store, mostly because walking into a store has become so intentional. You are either carrying (sufficient) cash on you or not. You either have enough credit on your card or not. And, honestly, for most people in the USA of my generation (so-called “millennials”) if there’s any thinking involved it might be “which card do I charge this to” and not “cash or credit?”
Also as with other studies making claims like these I immediately wonder about reproducibility.
As for the reproducibility it looks like, from the article, that they at least constructed several simular studies to test their theory:
1. "In one study, the authors analyzed more than 118,000 real-world purchases at the Stanford University Bookstore."
2. "Another study asked participants to imagine buying a 30-minute reiki session. Half read that the session was recommended by their doctor and would be at a hospital..."
3. "Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card."
It's at least not a single, "3 grad students did this in an afternoon at the 7-11" study that tend to get picked up. I don't doubt that more research into the phenomenon might help get a better understanding of the underlying motivations for "cash/credit", but it does look like they are getting similar results from multiple experiments.
So do I -- I would just prefer that Apple (or insert any other company in their place) didn't have access to that information. I can keep track of my own spending, I don't need a company to do it for me.
It would have been a 15% discount for my dad (VAT was 17.5%), and probably a slightly larger saving for the tradesman, although they have a higher penalty if somehow caught. I think it was usually done for small jobs, like minor plumbing fixes.
I have no idea how common this was in the 1990s, or how common it is now.
Someone else can come behind me and cite the court case/credit card guidance
It's generally illegal, however, for a business to evade taxes by failing to report the full value of cash sales. It's also legally dubious as a customer to knowingly help facilitate such transactions (e.g.: anti-laundering laws)... but I don't think it's common to catch heat for this if you're an otherwise law-abiding person.
This is like analyzing the details of how people use vinyl records to play music. It won’t matter in 1-2 decades.
Sounds like what people were saying about vinyl records 2 decades ago.
Unreported cash transactions create a whole separate economy that is exploited.
Take your local AC guy. Writes receipts, reports income, charges sales tax, gives the employees insurance etc...
Now the other guy, who doesn't do anything, and because of that is able to undercut the guy above by 10%.
Short term? Great, your AC is 10% cheaper. Long term? You got 5 people in your neighborhood who lost their job because a law that's there to protect them isn't enforced.
Or maybe this: https://www.nytimes.com/2022/02/22/world/americas/canada-pro...