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The Bottom Line vs. the Waistline

It’s the time of year when people may be feeling they are maxed out on their credit cards. So is it time to go ‘cash only?’  Researchers at Virginia Tech’s Pamplin School of Business warn, there’s a subtle catch to using cash. It may lead you to splurge even more. 

Many people believe paying with cash instead of credit cards can help your bottom line.

“ You know cash is more painful to spend with right, so you actually feel the money leaving your pocket and you feel the pain, the psychological pain of spending.” 

Assistant Professor of Marketing at Virginia Tech, Rajesh Bagchi, studies how consumers make decisions

“With credit, you know, you’re paying with a credit card, you don’t think that much about it and usually, it happens like a month later when you’re paying your bill, you’re like ‘Oh My God what was I thinking?’

At the Pamplin School of Business at Virginia Tech, they tested something he calls the ‘chocolate cake theory’. Turns out, people consume more calories when they pay with cash.

“And what we found there is that if you’re paying with cash because it is more painful to pay, people actually want immediate reward so they’re more likely to buy the more hedonic items or the caloristic items because they’re looking for pleasure. It is a little less with credit.”

So it seems looking after your bottom line can mean trouble for your waistline.

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