14 ms·

Cash Amnesia

malfist 3y ago
This goes against everything I'm familiar with around budgeting. 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
- electroly 3y ago
  IMO, that's outdated advice from the days before online automatic bookkeeping, before credit card transactions were immediately visible online, before your bank could auto-classify your credit card purchases into spending categories, before configurable spending alerts, before budgeting apps with bank integration, etc. 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.
  - tiltowait 3y ago
    It really depends on the person. I found that budgeting apps with bank integrations were quick and convenience, but I wound up in the trap of only doing the most superficial analysis. ("Yep, sure did spend that much.") For myself, manually logging purchases is far more effective. It's a similar observation as I had in college, where I found that hand-writing my notes helped me learn better than typing them.
  - brightball 3y ago
    It's not. The point of cash is to make you more psychologically aware of what you're spending so that you're less likely to buy something you don't need in the first place. 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.
    - Larrikin 3y ago
      It comes down to how you budget and pay your bills. If you take out large chunks of cash at a time then psychologically seeing the cash leave your wallet might personally help you if you treat budgeting as a once a month task. It's easy to get into trouble with a credit card if you never look at your transactions until the end of the month and treat the amount on your statement as a big blob you just have to pay while just glancing through your statement. 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.
      - djkivi 3y ago
        If you pay with cash then once your wallet is empty you’re done. I could spend far more on my credit cards than I actually have if I wanted to.
        Larrikin 3y ago
        If you do then you can enjoy yourself the night, and limit your purchases for the rest of month. 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.
    - electroly 3y ago
      I'm sure it does work for some people, but the popularity and success of budgeting apps suggests that it's not for everyone. The tradeoffs you mention are all of the accountability features I mentioned. The article is reporting on research that suggests that unaccountable cash spending is a problem for many people.
- WJW 3y ago
  I can easily see both depending on how diligently people track their spending. I have a budgeting system setup that adds a task to my daily to-do list if my bank balance differs from what is in my hledger files (ie if I have transactions in my bank account that I have not yet put into hledger). The chances of me not being aware of on-card spending is extremely low. Cash money is not tracked nearly as accurately though, I don't bother tracking it when I spend a few euro on some sandwich from a roadside stall.
  - jfim 3y ago
    That sounds like a pretty interesting setup, how do you have it work with your bank accounts?
    - WJW 3y ago
      It's extremely hacky and there is barely any automation at all. Everyday at 0500 a cronjob uses https://github.com/djc/abna https://github.com/djc/abna to fetch the bank balance and makes no effort at all to automatically parse more than the balance. It then compares that with what the balance "should" be according to hledger and sets up a todo item if there is any difference. Somewhere during the day I manually reconcile the two and check off the todo item. 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.
  - noeontheend 3y ago
    Can I ask how you get the current balance from your bank (i.e., do you have a bank that provides a nice API, or is there another trick you're using)? I've spent a lot of time looking for a way to automatically download transactions from all my accounts but still have to either enter them by hand or manually log in and download a CSV to import.
- ComputerGuru 3y ago
  On the other hand, I can book keep all my electronic transactions thanks to the many Yodlee-powered sites whereas the effort it takes to do that for cash transactions is phenomenal.
- CalRobert 3y ago
  How strange - if I use my card it stings, I know I'll see it later (and I tend to tally up monthly expenses from CC statements). Cash in my wallet feels almost like free money by comparison.
  - rob74 3y ago
    Looks like people are divided on this - I would say, when paying by card, it only stings once (if you even bother to go through the list regularly); when paying with cash, it stings twice: once when you have to fork out the actual money, and a second time when you realize you are out of cash (again) and have to get more from an ATM.
    - CalRobert 3y ago
      It depends on the person I suppose. I use cash rarely (mostly for tradespeople who are evading taxes) and when I "run out of cash" I don't really think more of it than when I run out of toilet paper.
- von_lohengramm 3y ago
  This is more about hiding/perpetuating bad habits vs enabling stupid purchases. Not about impulsively buying something just because it was on sale, but rather buying something you know you shouldn't... but it's just this once, I promise! No more after just this last one...
- deleted 3y ago
  [deleted]
- tekla 3y ago
  Uhhh what. Credit gives you a literal list of all the dumb purchase you made. Cash is just pieces of paper.
- mingus88 3y ago
  “I spent $100 on incidentals” 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.
  - brewdad 3y ago
    About the only place I spend cash regularly is the farmers market. I typically take out 80-120 dollars on my way to the market and come home with anywhere from 0-60 dollars and a pile of produce. I also probably bought coffee and something for breakfast. As far as spending goes, I know the money probably went towards food (or was it flowers or some crafty thing?) but it's really just a black hole where I ultimately end up categorizing it as "cash spending" in my budget software rather than trying to rebuild where exactly it went. Credit cards work much better for me.
- r4indeer 3y ago
  For me, I need to have it the other way around. Regular withdrawals of similar amounts on my bank statement tell me nothing about how I spent my money a month from now. 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.
  - wussboy 3y ago
    While I could make the same reply to almost every comment in this thread I have chosen yours at random. 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.
    - r4indeer 3y ago
      You are right, I left out an important part of my budgeting setup: Every month, after income, everything above a set amount is transferred automatically into a savings account. So at the beginning of each month, I have the same amount of money in my checking account. 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.
- Finnucane 3y ago
  I did this a long time ago, for a while I kept myself on a strict monthly cash budget to deal with some debts. In those days it was still relatively easy to get everything you needed locally for cash. It did mean that it didn't really matter that much what you were spending your money on, as long as the total didn't exceed the budget. You just had to be conscious of the choices. Even now, with the debts paid off I still live that way--I don't buy things unless I know I can pay for it, and I save some money every month. And I don't care that much about the details. I like spending cash just so I can forget about it. Do I really need an eternal record of that scone I bought on the way to work last week? I do not need that.
- wussboy 3y ago
  The research is on your side. Spending cash makes you spend less. Most respondents to your comment are making a category of error that is common in our Internet age: "I have more information, therefore I am making better decisions."
  - electroly 3y ago
    This article is also a summary of research and it offers a disagreement. Just saying "I have research" isn't persuasive when the article at hand is newer research. This is the paper being discussed: https://www.gsb.stanford.edu/faculty-research/publications/purchase-justifiability-drives-payment-choice-consumers-pay-card https://www.gsb.stanford.edu/faculty-research/publications/p...
- rkangel 3y ago
  I think this is ignoring that different approaches to budgeting are needed for different people. 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.
- davchana 3y ago
  My personal experiment in 2013 exactly matches your comment. I spent less when I used cash. I withdraw the same amount if monwy every month once a month, but the action of giving that money to cashier & checking the change and sorting out the notes in wallet made it real impact.
- __MatrixMan__ 3y ago
  I've heard that said, but it doesn't feel right. 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.
hooverd 3y ago
Obviously you pay cash so it doesn't affect your social credit score. 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.
- mdp2021 3y ago
  "social credit score"?
  - adastra22 3y ago
    [flagged]
    - mdp2021 3y ago
      The poster wrote «of course» (taking something for granted) and «you», suggesting an universal context, valid for "everyone". Not just places in which the practice is established.
      - deleted 3y ago
        [deleted]
  - hooverd 3y ago
    Ok, I live in the US, we don't have one of those. We do have a bunch of companies, insurers and otherwise, that want to assign some sort of risk score to you. Credit card companies will happily part way with transaction data. *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.
    - mdp2021 3y ago
      In Europe, all electronic transactions are shared between at least a dozen unclear public-private entities. 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.
treprinum 3y ago
Ugh, why is this an academic paper? Isn't that super obvious?
- schwartzworld 3y ago
  Things that are "super obvious" aren't always true.
ComputerGuru 3y ago
> But more detailed record-keeping may undermine financial apps’ usefulness. “If people know that there’s going to be a record every time they use Apple Pay, based on our theory, people actually will use it less compared to if Apple Pay doesn’t automatically track and record and remind them in the statement.” 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.
- GravelRocks 3y ago
  I assure you there are people that haven't decided how to pay for something before they reach the register. There's also a lot of people that will decide how to pay for something based on how much the purchase is at the register. Both of those examples are anecdotal, and come from working a register some decade and a half ago. Anecdotally, I bring cash with me when I go on vacation. I never really thought about it so much as guilt, but you could probably characterize it somewhat as that. It's at least done partially for budgetary reasons, but I'm sure subconsciously I really don't want to remember spending $80 at the Tiki bar. 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.
EGreg 3y ago
How quaint. Countries around the world are gradually phasing out cash, and forcing banks to report any transactions that add up to more than $600. They want the tax revenue and ultimate control — but they’ll claim it’s mostly to prevent “money laundering”. This is like analyzing the details of how people use vinyl records to play music. It won’t matter in 1-2 decades.
- anamexis 3y ago
  > 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.
  - EGreg 3y ago
    And they were correct
- chrismcb 3y ago
  America started to do this to try to collect taxes on small transactions. Not to prevent money laundering.
  - WirelessGigabit 3y ago
    And I don't mind it at all. 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.
    - EGreg 3y ago
      I wonder if you would mind when this happens to you: https://www.theverge.com/2019/3/1/18246297/china-transportation-people-banned-poor-social-credit-planes-trains-2018 https://www.theverge.com/2019/3/1/18246297/china-transportat... Or maybe this: https://www.nytimes.com/2022/02/22/world/americas/canada-protest-finances.html https://www.nytimes.com/2022/02/22/world/americas/canada-pro...
hunter2_ 3y ago
> “Certain products are more guilt-inducing because they feel more like impulsive purchases, like a foam hand for the sports game,” Huang says. “Some are more rational purchases, such as books or stationery products for class.” Sure enough, they found that customers were more likely to pay in cash for harder-to-justify items like stuffed plush mascots and Christmas ornaments. 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.
- TheRealPomax 3y ago
  When I first moved to North America, the idea that a credit card company was allowed to give people cash back, offer insurance, etc. for using their cards seemed like some bizarroworld "how is this legal" concept. Having lived here for decades, it still is. It's like an alcohol shop rewarding its most alcoholic customers by giving them free booze. 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.
  - ImPostingOnHN 3y ago
    I feel like it'd be totally normal for any restaurant or store to give a discount to its best customers
    - TheRealPomax 3y ago
      "You're taking a lot of drugs, we're going to make sure you keep taking them by giving you free drugs" is extremely different from "you're buying a lot of bras, we're going to give you a free bra". This should not even require pointing out, but apparently it does.
MyNameIsRansom 3y ago
Lots of small businesses do "cash no tax". It's not forgotten when it's spent. I've fixed my car in cash (primarily to save on tax; and to not have it known by insurance). It's hard for one to "amnesia" $5000 in cash. It's a tool, just like a credit card.
- AlanSE 3y ago
  As in, they use tax to avoid reporting the earnings? That works fine for the scale of a lemonade stand.
- chrismcb 3y ago
  I've never seen anyone do this. But, unless the small business is committing fraud, they are then eating the tax. I don't a small business is going to willing pay 10% (or whatever the tax is)
  - kevinmchugh 3y ago
    I haven't either but I regularly see 3-5% cash discounts. Tax is 10% in my locality, in lower tax places it makes sense
  - Symbiote 3y ago
    I sometimes saw my dad doing this in Britain, where it is certainly tax evasion. He'd ask the price of a service, then ask if there was a discount for "cash in hand". Occasionally, I think tradesmen would offer both prices upfront, or say "will you be needing a receipt?". 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.
- KomoD 3y ago
  Is that legal?
  - 3y ago
1970-01-01 3y ago
I use cash at small businesses to get a 1%-5% discount. The study seems to skip this use case.
abtinf 3y ago
[flagged]
bern4444 3y ago
I've always thought the opposite. 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.
- JumpCrisscross 3y ago
  Out of curiosity, how old are you? I’m in my thirties and think the same.
  - Etheryte 3y ago
    I don't think it's tied that much to age, but rather local culture. For example this mindset is prevalent in Germany and Switzerland to the point where many locals look at you weird when you ask them why they prefer cash. (There are other historical reasons here too, but that doesn't take away from the main point.)
    - JumpCrisscross 3y ago
      > when you ask them why they prefer cash Would they also say they spend cash more loosely than card? That's the phenomenon being described, not absolute preference.
      - Etheryte 3y ago
        In the conversations I've had with people from Germany and Switzerland it's the other way around, with cash they're more aware and thus more frugal with their spending.
sneed_chucker 3y ago
When I pay with cash, all purchases are essentially rounded up to the Dollar, since I will literally never end up spending my change anywhere once it enters coin form.
- CaliforniaKarl 3y ago
  I'm curious: Do you go grocery-shopping yourself? If yes, do you use a self-checkout option? And if yes, does it support paying with cash? 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.
  - brewdad 3y ago
    While that's certainly an option, it would require both that I remember to grab my accumulated coins before leaving for the shop and that I spend extra time feeding them into the machine. These friction points will probably lead me to my current path of least resistance, tossing my coins into a container on my dresser and dealing with them about once a decade when it fills up.
    - pests 3y ago
      Self checkout machines around me have just a port you dump all the coins in at once and it counts them up.
  - theandrewbailey 3y ago
    I started doing that a year or two ago. A self checkout won't get angry with you for pulling out a bunch of change and having to count it. And I'm usually shopping during off hours (~9 PM), so no one else is around to get annoyed either.
  - OkayPhysicist 3y ago
    The time spent handling small coins is actually worth more than the coins themselves. If you value your free time somewhere in the ballpark of $80/hr, then you should spend no more than 2 seconds acquiring, maintaining possession of, and then spending, a nickel. IMO, that makes anything less than a quarter worthless.
bbstats 3y ago
If you don't have a lot of money this is true. I think the opposite happens if you are rich.
pitterpatter 3y ago
This sorta meshes with how I tend to think of cash. I essentially consider withdrawn cash as already "spent" the moment it leaves my account. So when I do get around to spending that cash (especially on something frivolous) there's less of a hangup over it.
- bamfly 3y ago
  Same—though I didn't used to do that back when 1) I had a whole lot less money, and 2) I used cash way more often. 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.
passwordoops 3y ago
Necessary caveat on the current state of irreproducibility and outright fraud in Behavioural economics. See, for example, the thread a few days back about Dan Ariely: https://news.ycombinator.com/item?id=36684242 https://news.ycombinator.com/item?id=36684242
superdug 3y ago
Meh. Come out with the hard truth, most expenditures we make are not fulfilling. The idea that we are spending money to gain something is a bullshit lie we convince ourselves of. Unfortunately non-tangible investments are the most terrifying expenditures. You physically have nothing to show for the money you no longer have and you question its validity and go so far as to course correct and buy something you can hold onto forever. What are these expenditures? Donations, endowments, and just using some of your means to give to someone who can benefit more than you could ever imagine. You know your neighbor who could use a night off, deliver dinner to them and their family. Your cousin who just got out on his own, deliver a weeks worth of essentials from Walmart. I could go on and on, but my personal way of expending my disposable income now a days is to do a free to sub-$100 favor for someone I know would appreciate help, but is too proud to ever ask for something that they weren’t deathly desperate of needing. You come off as an empathetic and generous human being and you don’t ever feel taken advantage of because you’re the one who initiated it.
Animats 3y ago
I'm more into how likely it is someone will run up an extra charge on my card, or how much of a pain their POS system is. (Can it split checks? Do I have to sign on a touch screen with my fingernail? Is performance so bad it acts like the credit card terminal is on dialup and the line is in use? Encountered all three of those in the last month.)
hot_gril 3y ago
Nah. Nothing induces guilt more than finding my wallet is empty again.

This goes against everything I'm familiar with around budgeting. 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

electroly 3y ago
IMO, that's outdated advice from the days before online automatic bookkeeping, before credit card transactions were immediately visible online, before your bank could auto-classify your credit card purchases into spending categories, before configurable spending alerts, before budgeting apps with bank integration, etc. 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.
- tiltowait 3y ago
  It really depends on the person. I found that budgeting apps with bank integrations were quick and convenience, but I wound up in the trap of only doing the most superficial analysis. ("Yep, sure did spend that much.") For myself, manually logging purchases is far more effective. It's a similar observation as I had in college, where I found that hand-writing my notes helped me learn better than typing them.
- brightball 3y ago
  It's not. The point of cash is to make you more psychologically aware of what you're spending so that you're less likely to buy something you don't need in the first place. 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.
  - Larrikin 3y ago
    It comes down to how you budget and pay your bills. If you take out large chunks of cash at a time then psychologically seeing the cash leave your wallet might personally help you if you treat budgeting as a once a month task. It's easy to get into trouble with a credit card if you never look at your transactions until the end of the month and treat the amount on your statement as a big blob you just have to pay while just glancing through your statement. 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.
    - djkivi 3y ago
      If you pay with cash then once your wallet is empty you’re done. I could spend far more on my credit cards than I actually have if I wanted to.
      - Larrikin 3y ago
        If you do then you can enjoy yourself the night, and limit your purchases for the rest of month. 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.
  - electroly 3y ago
    I'm sure it does work for some people, but the popularity and success of budgeting apps suggests that it's not for everyone. The tradeoffs you mention are all of the accountability features I mentioned. The article is reporting on research that suggests that unaccountable cash spending is a problem for many people.
WJW 3y ago
I can easily see both depending on how diligently people track their spending. I have a budgeting system setup that adds a task to my daily to-do list if my bank balance differs from what is in my hledger files (ie if I have transactions in my bank account that I have not yet put into hledger). The chances of me not being aware of on-card spending is extremely low. Cash money is not tracked nearly as accurately though, I don't bother tracking it when I spend a few euro on some sandwich from a roadside stall.
- jfim 3y ago
  That sounds like a pretty interesting setup, how do you have it work with your bank accounts?
  - WJW 3y ago
    It's extremely hacky and there is barely any automation at all. Everyday at 0500 a cronjob uses https://github.com/djc/abna https://github.com/djc/abna to fetch the bank balance and makes no effort at all to automatically parse more than the balance. It then compares that with what the balance "should" be according to hledger and sets up a todo item if there is any difference. Somewhere during the day I manually reconcile the two and check off the todo item. 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.
- noeontheend 3y ago
  Can I ask how you get the current balance from your bank (i.e., do you have a bank that provides a nice API, or is there another trick you're using)? I've spent a lot of time looking for a way to automatically download transactions from all my accounts but still have to either enter them by hand or manually log in and download a CSV to import.
ComputerGuru 3y ago
On the other hand, I can book keep all my electronic transactions thanks to the many Yodlee-powered sites whereas the effort it takes to do that for cash transactions is phenomenal.
CalRobert 3y ago
How strange - if I use my card it stings, I know I'll see it later (and I tend to tally up monthly expenses from CC statements). Cash in my wallet feels almost like free money by comparison.
- rob74 3y ago
  Looks like people are divided on this - I would say, when paying by card, it only stings once (if you even bother to go through the list regularly); when paying with cash, it stings twice: once when you have to fork out the actual money, and a second time when you realize you are out of cash (again) and have to get more from an ATM.
  - CalRobert 3y ago
    It depends on the person I suppose. I use cash rarely (mostly for tradespeople who are evading taxes) and when I "run out of cash" I don't really think more of it than when I run out of toilet paper.
von_lohengramm 3y ago
This is more about hiding/perpetuating bad habits vs enabling stupid purchases. Not about impulsively buying something just because it was on sale, but rather buying something you know you shouldn't... but it's just this once, I promise! No more after just this last one...
deleted 3y ago
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tekla 3y ago
Uhhh what. Credit gives you a literal list of all the dumb purchase you made. Cash is just pieces of paper.
mingus88 3y ago
“I spent $100 on incidentals” 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.
- brewdad 3y ago
  About the only place I spend cash regularly is the farmers market. I typically take out 80-120 dollars on my way to the market and come home with anywhere from 0-60 dollars and a pile of produce. I also probably bought coffee and something for breakfast. As far as spending goes, I know the money probably went towards food (or was it flowers or some crafty thing?) but it's really just a black hole where I ultimately end up categorizing it as "cash spending" in my budget software rather than trying to rebuild where exactly it went. Credit cards work much better for me.
r4indeer 3y ago
For me, I need to have it the other way around. Regular withdrawals of similar amounts on my bank statement tell me nothing about how I spent my money a month from now. 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.
- wussboy 3y ago
  While I could make the same reply to almost every comment in this thread I have chosen yours at random. 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.
  - r4indeer 3y ago
    You are right, I left out an important part of my budgeting setup: Every month, after income, everything above a set amount is transferred automatically into a savings account. So at the beginning of each month, I have the same amount of money in my checking account. 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.
Finnucane 3y ago
I did this a long time ago, for a while I kept myself on a strict monthly cash budget to deal with some debts. In those days it was still relatively easy to get everything you needed locally for cash. It did mean that it didn't really matter that much what you were spending your money on, as long as the total didn't exceed the budget. You just had to be conscious of the choices. Even now, with the debts paid off I still live that way--I don't buy things unless I know I can pay for it, and I save some money every month. And I don't care that much about the details. I like spending cash just so I can forget about it. Do I really need an eternal record of that scone I bought on the way to work last week? I do not need that.
wussboy 3y ago
The research is on your side. Spending cash makes you spend less. Most respondents to your comment are making a category of error that is common in our Internet age: "I have more information, therefore I am making better decisions."
- electroly 3y ago
  This article is also a summary of research and it offers a disagreement. Just saying "I have research" isn't persuasive when the article at hand is newer research. This is the paper being discussed: https://www.gsb.stanford.edu/faculty-research/publications/purchase-justifiability-drives-payment-choice-consumers-pay-card https://www.gsb.stanford.edu/faculty-research/publications/p...
rkangel 3y ago
I think this is ignoring that different approaches to budgeting are needed for different people. 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.
davchana 3y ago
My personal experiment in 2013 exactly matches your comment. I spent less when I used cash. I withdraw the same amount if monwy every month once a month, but the action of giving that money to cashier & checking the change and sorting out the notes in wallet made it real impact.
__MatrixMan__ 3y ago
I've heard that said, but it doesn't feel right. 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.

hooverd 3y ago

Obviously you pay cash so it doesn't affect your social credit score. 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.

mdp2021 3y ago
"social credit score"?
- adastra22 3y ago
  [flagged]
  - mdp2021 3y ago
    The poster wrote «of course» (taking something for granted) and «you», suggesting an universal context, valid for "everyone". Not just places in which the practice is established.
    - deleted 3y ago
      [deleted]
- hooverd 3y ago
  Ok, I live in the US, we don't have one of those. We do have a bunch of companies, insurers and otherwise, that want to assign some sort of risk score to you. Credit card companies will happily part way with transaction data. *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.
  - mdp2021 3y ago
    In Europe, all electronic transactions are shared between at least a dozen unclear public-private entities. 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.

treprinum 3y ago

Ugh, why is this an academic paper? Isn't that super obvious?

schwartzworld 3y ago
Things that are "super obvious" aren't always true.

ComputerGuru 3y ago

> But more detailed record-keeping may undermine financial apps’ usefulness. “If people know that there’s going to be a record every time they use Apple Pay, based on our theory, people actually will use it less compared to if Apple Pay doesn’t automatically track and record and remind them in the statement.” 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.

GravelRocks 3y ago
I assure you there are people that haven't decided how to pay for something before they reach the register. There's also a lot of people that will decide how to pay for something based on how much the purchase is at the register. Both of those examples are anecdotal, and come from working a register some decade and a half ago. Anecdotally, I bring cash with me when I go on vacation. I never really thought about it so much as guilt, but you could probably characterize it somewhat as that. It's at least done partially for budgetary reasons, but I'm sure subconsciously I really don't want to remember spending $80 at the Tiki bar. 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.

EGreg 3y ago

How quaint. Countries around the world are gradually phasing out cash, and forcing banks to report any transactions that add up to more than $600. They want the tax revenue and ultimate control — but they’ll claim it’s mostly to prevent “money laundering”. This is like analyzing the details of how people use vinyl records to play music. It won’t matter in 1-2 decades.

anamexis 3y ago
> 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.
- EGreg 3y ago
  And they were correct
chrismcb 3y ago
America started to do this to try to collect taxes on small transactions. Not to prevent money laundering.
- WirelessGigabit 3y ago
  And I don't mind it at all. 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.
  - EGreg 3y ago
    I wonder if you would mind when this happens to you: https://www.theverge.com/2019/3/1/18246297/china-transportation-people-banned-poor-social-credit-planes-trains-2018 https://www.theverge.com/2019/3/1/18246297/china-transportat... Or maybe this: https://www.nytimes.com/2022/02/22/world/americas/canada-protest-finances.html https://www.nytimes.com/2022/02/22/world/americas/canada-pro...

hunter2_ 3y ago

> “Certain products are more guilt-inducing because they feel more like impulsive purchases, like a foam hand for the sports game,” Huang says. “Some are more rational purchases, such as books or stationery products for class.” Sure enough, they found that customers were more likely to pay in cash for harder-to-justify items like stuffed plush mascots and Christmas ornaments. 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.

TheRealPomax 3y ago
When I first moved to North America, the idea that a credit card company was allowed to give people cash back, offer insurance, etc. for using their cards seemed like some bizarroworld "how is this legal" concept. Having lived here for decades, it still is. It's like an alcohol shop rewarding its most alcoholic customers by giving them free booze. 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.
- ImPostingOnHN 3y ago
  I feel like it'd be totally normal for any restaurant or store to give a discount to its best customers
  - TheRealPomax 3y ago
    "You're taking a lot of drugs, we're going to make sure you keep taking them by giving you free drugs" is extremely different from "you're buying a lot of bras, we're going to give you a free bra". This should not even require pointing out, but apparently it does.

MyNameIsRansom 3y ago

Lots of small businesses do "cash no tax". It's not forgotten when it's spent. I've fixed my car in cash (primarily to save on tax; and to not have it known by insurance). It's hard for one to "amnesia" $5000 in cash. It's a tool, just like a credit card.

AlanSE 3y ago
As in, they use tax to avoid reporting the earnings? That works fine for the scale of a lemonade stand.
chrismcb 3y ago
I've never seen anyone do this. But, unless the small business is committing fraud, they are then eating the tax. I don't a small business is going to willing pay 10% (or whatever the tax is)
- kevinmchugh 3y ago
  I haven't either but I regularly see 3-5% cash discounts. Tax is 10% in my locality, in lower tax places it makes sense
- Symbiote 3y ago
  I sometimes saw my dad doing this in Britain, where it is certainly tax evasion. He'd ask the price of a service, then ask if there was a discount for "cash in hand". Occasionally, I think tradesmen would offer both prices upfront, or say "will you be needing a receipt?". 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.
KomoD 3y ago
Is that legal?
- 3y ago

1970-01-01 3y ago

I use cash at small businesses to get a 1%-5% discount. The study seems to skip this use case.

abtinf 3y ago

[flagged]

bern4444 3y ago

I've always thought the opposite. 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.

JumpCrisscross 3y ago
Out of curiosity, how old are you? I’m in my thirties and think the same.
- Etheryte 3y ago
  I don't think it's tied that much to age, but rather local culture. For example this mindset is prevalent in Germany and Switzerland to the point where many locals look at you weird when you ask them why they prefer cash. (There are other historical reasons here too, but that doesn't take away from the main point.)
  - JumpCrisscross 3y ago
    > when you ask them why they prefer cash Would they also say they spend cash more loosely than card? That's the phenomenon being described, not absolute preference.
    - Etheryte 3y ago
      In the conversations I've had with people from Germany and Switzerland it's the other way around, with cash they're more aware and thus more frugal with their spending.

sneed_chucker 3y ago

When I pay with cash, all purchases are essentially rounded up to the Dollar, since I will literally never end up spending my change anywhere once it enters coin form.

CaliforniaKarl 3y ago
I'm curious: Do you go grocery-shopping yourself? If yes, do you use a self-checkout option? And if yes, does it support paying with cash? 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.
- brewdad 3y ago
  While that's certainly an option, it would require both that I remember to grab my accumulated coins before leaving for the shop and that I spend extra time feeding them into the machine. These friction points will probably lead me to my current path of least resistance, tossing my coins into a container on my dresser and dealing with them about once a decade when it fills up.
  - pests 3y ago
    Self checkout machines around me have just a port you dump all the coins in at once and it counts them up.
- theandrewbailey 3y ago
  I started doing that a year or two ago. A self checkout won't get angry with you for pulling out a bunch of change and having to count it. And I'm usually shopping during off hours (~9 PM), so no one else is around to get annoyed either.
- OkayPhysicist 3y ago
  The time spent handling small coins is actually worth more than the coins themselves. If you value your free time somewhere in the ballpark of $80/hr, then you should spend no more than 2 seconds acquiring, maintaining possession of, and then spending, a nickel. IMO, that makes anything less than a quarter worthless.

bbstats 3y ago

If you don't have a lot of money this is true. I think the opposite happens if you are rich.

pitterpatter 3y ago

This sorta meshes with how I tend to think of cash. I essentially consider withdrawn cash as already "spent" the moment it leaves my account. So when I do get around to spending that cash (especially on something frivolous) there's less of a hangup over it.

bamfly 3y ago
Same—though I didn't used to do that back when 1) I had a whole lot less money, and 2) I used cash way more often. 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.

passwordoops 3y ago

Necessary caveat on the current state of irreproducibility and outright fraud in Behavioural economics. See, for example, the thread a few days back about Dan Ariely: https://news.ycombinator.com/item?id=36684242 https://news.ycombinator.com/item?id=36684242

superdug 3y ago

Meh. Come out with the hard truth, most expenditures we make are not fulfilling. The idea that we are spending money to gain something is a bullshit lie we convince ourselves of. Unfortunately non-tangible investments are the most terrifying expenditures. You physically have nothing to show for the money you no longer have and you question its validity and go so far as to course correct and buy something you can hold onto forever. What are these expenditures? Donations, endowments, and just using some of your means to give to someone who can benefit more than you could ever imagine. You know your neighbor who could use a night off, deliver dinner to them and their family. Your cousin who just got out on his own, deliver a weeks worth of essentials from Walmart. I could go on and on, but my personal way of expending my disposable income now a days is to do a free to sub-$100 favor for someone I know would appreciate help, but is too proud to ever ask for something that they weren’t deathly desperate of needing. You come off as an empathetic and generous human being and you don’t ever feel taken advantage of because you’re the one who initiated it.

Animats 3y ago

I'm more into how likely it is someone will run up an extra charge on my card, or how much of a pain their POS system is. (Can it split checks? Do I have to sign on a touch screen with my fingernail? Is performance so bad it acts like the credit card terminal is on dialup and the line is in use? Encountered all three of those in the last month.)

hot_gril 3y ago

Nah. Nothing induces guilt more than finding my wallet is empty again.