Pain of Paying
The Basic Idea
When you go shopping, is your default payment method cash or a credit card? If you typically pay with your cards, you may find this a silly question - carrying a single card is more convenient than a wallet full of cash! Aside from the factor of convenience, there may be another subconscious reason behind your choices.
The pain of paying refers to the negative emotions we feel when making a purchase.1 This happens because as humans, we are loss averse: we want to avoid losses whenever possible, and losses are perceived to be more powerful than equal gains. When we make payments, we incur a loss, which is why these transactions can be painful. Moreover, the pain of paying has been found to be stronger when paying with cash than with a credit or debit card.2 Our loss of money is more salient to the brain when handing over physical cash, rather than swiping a piece of plastic.
I don’t think we should go around life being miserable all the time and feel the pain of paying. It’s a question of what categories we want to spend more on and what categories we feel that we are spending too much on and we want to cut down.
– Dan Ariely, behavioral economist and author of Predictably Irrational: The Hidden Forces That Shape Our Decisions
About the Authors
Dan Pilat
Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.
Dr. Sekoul Krastev
Dr. Sekoul Krastev is a decision scientist and Co-Founder of The Decision Lab, one of the world's leading behavioral science consultancies. His team works with large organizations—Fortune 500 companies, governments, foundations and supernationals—to apply behavioral science and decision theory for social good. He holds a PhD in neuroscience from McGill University and is currently a visiting scholar at NYU. His work has been featured in academic journals as well as in The New York Times, Forbes, and Bloomberg. He is also the author of Intention (Wiley, 2024), a bestselling book on the science of human agency. Before founding The Decision Lab, he worked at the Boston Consulting Group and Google.
