Buying for Cost vs Buying for Benefits

Every purchase you make is, in some ways, an investment. You’re either investing in your future financial well-being – as you might do with stocks or a home – or you’re investing in your happiness – as you might do with a trip to the movies. Making wise investments means buying with purpose. Specifically, it means being master of your own financial decisions, and making purchases accordingly. What you may not realize, however, is that even the method of payment you choose can influence your buying decisions. According to some recent research by professors Chatterjee and Rose from the University of Kansas and the University of South Carolina, whether you pay with a credit card or whether you pay with cash can impact exactly what you buy and how much you spend.

Cash and cost, Credit cards and benefits

Specifically, what the researchers discovered was that consumers who paid with cash, or who intended to pay with cash, were more concerned about cost. Those customers who paid with a credit card, or who intended to pay with a credit card, were more concerned about benefits.
Here’s how the researchers’ results broke down in terms of benefits: • Customers who were primed to use a credit card demonstrated greater recall of benefit-related words. • Customers who were primed to use cash tended to have memory errors when it came to benefit-related words. • Credit card customers responded faster to credit card words.

And here’s what the researchers discovered in terms of costs:

• Customers who were primed to use cash demonstrated greater recall of cost-related words. • Customers who were primed to use credit cards made more errors in terms of cost. • Cash customers were more interested in all aspects of cost, beyond the listed price. They were concerned with ancillary costs such as delivery time, delivery cost, cost of warranty, cost of installation, and more. The connection between cash and cost, as well as the connection between credit cards and benefits, is stark.

Other observations

The researchers discovered some other factors related to cash versus credit card purchases, as well: • Credit card customers tended to make purchase decisions that were more indulgent. • Cash customers were more likely to feel the “pain of payment” – meaning they were much more aware of how much they were spending and when. • Credit card customers disconnected the act of consumption of a product from the payment for that product, giving instant gratification with no immediate penalty. • Methods of payment that work like cash – such as gift cards – had a similar impact as credit cards. The researchers theorized that while the value of a gift card does decrease with every transaction, its impact isn’t immediately visible and so customers acted more like they did with credit cards.

Making wise purchase decisions

There are times when you want to save, and there are times when you need to buy something that gives the greatest benefit. Choosing the right purchase method for a given transaction will help you insure you meet those goals.

About the Author: David Rodwell is a seasoned writer in business and personal finance, taking a particular interest in payment processing. You can find more of his articles located at