The pain of paying

It’s not a pleasant feeling parting with our hard-earned cash. However, spending can be more or less painful depending on the payment method.

By using plastic, and even more so with contactless payments, the depletion of money is less visible, so it's easy to disassociate yourself from the payment, easing any negative emotion and enabling yourself to take more enjoyment from your purchase.

When it comes to saving, rapidly evolving technology is simplifying the methods of payment, making it easier to spend, harder to save, harder to budget and difficult to keep control over our finances.

What affects the pain of paying?

The timing of payment and the type of payment can influence the pain of paying.

Timing of payment

The pain of paying is reduced when a period of time elapses between when the purchase is made and the money actually leaving your bank account. For example, when you pay by credit card.

It’s significantly more tempting to splash out and treat yourself when you know the pain of paying will be delayed.

Type of payment

The physical act of handing over cash also greatly increases the pain of paying – compared with paying on a card, where the transfer of money is less tangible.

This is because you're more aware of exactly how much of your money you’re parting with.

People can experience a range of negative feelings when thinking about their finances including worry, stress and nervousness. If you’re less likely to feel worried or stressed, about making a payment, you could be more susceptible to spending more often.

The rise of contactless cards 

The introduction of contactless cards has become one of the most widely implemented changes to impact the pain of paying. First introduced in 2007, the success of contactless cards resulted in the limit per transaction being raised to £30 in 2015.

According to The UK Card Association [1]Footnote 1, in 2016:

  • 1 in 2 credit cards were contactless [1]Footnote 1
  • 39.2 million card payments were made in the UK everyday [1]Footnote 1
  • 53% of all retail spending was done by debit card, with 24% on a credit card [1]Footnote 1.

But contactless cards aren’t the only payment technologies that have been developed to reduce ‘the pain of paying’:

  • Using secure online payment systems, such as PayPal, makes online transactions even easier, as you pre-register your bank details so at the point of sale there’s no need to input your card information.
  • Similarly, spending money via your phone apps also makes spending easier, as your account already holds your bank details. Some phones even allow you to make downloads, as well as paying for products and services, using fingerprint recognition, rather than needing to type in a password.
  • Purchasing items on credit or finance could reduce ‘the pain of paying’, as the payments are made in small installments. You feel like the cost is less, even though the total amount is the same (if not more after interest).

What’s the impact of reduced pain of paying?

If you're not saving as much as you'd like, spending methods that reduce the pain of paying can lead you to spend more freely and not take note of all your expenditures. This can also have a knock on effect on your ability to budget and a negative impact on your savings pots.

If saving for the future means forgoing spending today, next time you reach for your contactless card, remember that the pain of paying may have been reduced, but the price tag is still the same.

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