Indulging in a Guilty Pleasure? Don’t Put It on the Card.

With the rise of online shopping, digital payments, and cryptocurrency, the role of cash in the U.S. has diminished. However, fans of a cashless economy may be overlooking an unsung benefit of hard currency — its forgettability.

In a new paper, Szu-chi Huang, an associate professor of marketing at Stanford Graduate School of Business, investigates whether consumers pay for guilty pleasures and other hard-to-justify purchases with cash so they don’t have to confront a record of their spending.

The research builds on the concept of “motivated memory” — how people consciously or unconsciously shape their recollections of memorable or forgettable experiences. “We remember things that we want to remember, and we try to forget things that we want to forget,” Huang explains.

This idea also applies to the choices we make as consumers. Huang’s coauthor Joshua Morris, PhD ’18, got the idea for the study from a joke by the late comedian Mitch Hedberg: “I bought a doughnut and they gave me a receipt for the doughnut; I don’t need a receipt for the doughnut. I’ll just give you the money, and you give me the doughnut, end of transaction. We don’t need to bring ink and paper into this.”

The researchers hypothesized that bringing a record into a transaction may not only change the way we see our purchase but how we see ourselves. Lead author Christopher Bechler, PhD ’21, an assistant professor of marketing at Mendoza College of Business at the University of Notre Dame, says that people who view their transactions as a reflection of who they are may think, “I see my credit card bill: I purchased something at the gas station that was unhealthy, and so I’m a person who eats unhealthy.” To avoid that moment of self-recrimination, they may reach for cash instead.

To test this theory, the researchers designed a series of experiments to examine how people who haven’t decided on a payment method ahead of time are affected by the type of purchase they’re making. (They acknowledge that some consumers have other motivations for leaving no financial tracks, such as hiding purchases from partners or the government.)

The Price of Forgetting

In one study, the authors analyzed more than 118,000 real-world purchases at the Stanford University Bookstore. They coded products based on how guilty shoppers might feel about them. “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.

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. The other half was told this was a spur-of-the-moment purchase from a holistic healer. Participants were significantly more likely to use cash instead of a credit card when purchasing a reiki session simply for pleasure. When imagining the session was medically useful, Huang says, “There was a rational foundation for why you purchased it. And when that’s the case, people don’t need to forget about it. They’re fine putting it on the card.”

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. The researchers found that people with the debit card were more likely to use cash to make a harder-to justify purchase (in this case, a party-sized bag of M&M’s). However, those with a prepaid card used it as often as cash to buy the candy.

“As the products change, people actually change how they want to pay for the product,” Huang says. “They don’t always pay with cash and they don’t always pay with cards. It really depends on how guilty they feel about that purchase.” She notes that the desirable forgettability of spending isn’t limited to cash: She says she has a particular credit card that she checks less than others, so she puts less-justifiable luxury purchases like camera equipment on it.

Cash Amnesia

How do these findings apply to the future of shopping? As cash becomes less relevant, the researchers propose that other forms of money, like cryptocurrencies that are less trackable, may replace it in terms of forgettability. Huang and Bechler recently published a paper that finds people who do not use crypto are more willing to gamble Bitcoin they earn compared to cash they earn because they feel like it has less value.

The researchers’ findings on cash amnesia also suggest that budget-tracking apps and mobile payment services may spur consumers to use cash proactively to forget hard-to-justify purchases. “These days, there are more apps to help you track all these expenses,” Huang says.

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.” She says financial institutions might consider designing payment methods that give users fewer reminders and notifications as alternatives, “because we do know that there are many instances where consumers actually desire to forget their payments.”

On the commercial side, Bechler says these findings imply that merchants may improve consumer satisfaction by matching their accepted payment methods to their particular offerings. For example, Hedberg’s donut shop may benefit from accepting cash even as more retailers refuse it.

On the other hand, a salad place might not see the same sort of benefit from welcoming cash — unless its salads are so expensive that they feel like a guilty pleasure. “As we have more types of payment methods, and all of them have fees for the merchants, it becomes an important decision,” Huang says. “Should I accept these new payment methods or not?”