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New research into the psychology of spending indicates consumers are more likely to overspend when using credit or gift cards instead of cash to pay for purchases. Two business professors-Priya Raghubir of the Stern School of Business at New York University and Joydeep Srivastava, associate professor at the Robert H. Smith School of Business at the University of Maryland, College Park-conducted four controlled experiments to examine the process of paying with cash versus credit cards, gift cards and cash-like coupons. The researchers found consumers less willing to part with cash for transactions than with credit cards or stored-value forms of payment. Card payments nullify the "pain of paying," or the anxiety one feels when parting with cash, and can influence individuals to spend above and beyond their means, the researchers conclude. "That's why we labeled it Monopoly money," Srivastava tells CardLine sister publication Prepaid Trends. "People act like they are playing Monopoly and throwing money around. It doesn't seem real, so they're much more likely to spend." The authors conclude cash is the most "transparent" form of payment, and "the more transparent the payment outflow, the greater the aversion to spending, or higher the 'pain' of paying.'" The American Psychological Association published their report "Monopoly Money: The Effect of Payment Coupling and Form on Spending Behavior" this month
