Cash, Credit, and Cost

by Darwin on May 25, 2012

Whether you’re a consumer who wants to be sure you’re getting the best value from your purchases or whether you’re a business that’s looking at its business plan, you need to be thinking about credit, and about how credit affects purchase decisions. The fact of the matter is that a consumer’s choices are impacted by a number of factors, one of which has to do with whether they’re using cash or credit.

Since the 1970s, experts have told us that credit customers make different buying decisions than cash customers. The average credit purchase tends to be higher than the average cash purchase. Recent research from Professor Randal Rose at the University of South Carolina and Professor Promothesh Chatterjee at the University of Kansas gives us some insight into why that is, exactly.

Primed for credit

In their research, consumers were “primed” for credit card purchases by being shown a series of credit-related words. Other consumers were primed for cash using cash-related words. What they found over the course of several different studies was truly telling about how we look at purchases and cost in relation to purchase method:

  • Customers primed for credit had greater recall of benefit-related words and ideas, but were prone to making mistakes in the area of costs.
  • Customers primed for cash had greater recall of cost-related words, but didn’t have as vivid a memory of benefits.
  • Accordingly, credit customers were more focused on benefits; cash customers were more focused on costs.
  • Cash customers were concerned about more than just the purchase price of an item; they were likely to remember and notice details about installation or delivery costs, warranty costs, and even time for delivery.
  • A variety of triggers can prime a customer for credit, such as the presence of stickers on the front door of a business that advertises credit card acceptance. This is true even if the consumer hasn’t determined a payment method when they arrive at the place of business.
  • Credit card customers more often than cash customers made choices that were indulgent, and that were high-profile products.

This research tells us that credit card customers have a different way of buying than cash customers.

Making it work for you

This has all sorts of implications for both businesses and consumers. For example, if you set out looking for a product and want the best available – you’re better able to analyze benefits if you’re using a credit card. Conversely, if you’re looking for the best price, cash will help you choose the value product.

For businesses, it tells us that accepting credit cards leads to different types of transactions. You’re more likely to sell high-profile, high-benefit items to credit card customers, and placing credit-related signs and stickers in your store can actually help prime customers to use credit.

Credit cards have changed the way we buy and the way we do business. By better understanding our buying habits, we can make better decisions on both personal and business levels.

David Rodwell is a seasoned writer in business, personal finance and economics, taking a particular interest in payment processing. You can find more of his articles located at

{ 4 comments… read them below or add one }

krantcents May 25, 2012 at 4:36 pm

For me, credit cards are purely a convenience because I pay off my entire balance every month. Do I spend more because I use a credit card? No!


Darwin May 27, 2012 at 11:51 am

Totally, I put virtually everything on the credit card and haven’t paid an interest payment since I was a college kid – once. And that was enough!


Lance@MoneyLife&More May 27, 2012 at 9:54 am

I agree with krantcents. I have always used a credit card as my main purchasing method due to the cash back benefits. I pay it off in full every month and if anything I spend less with credit because I know it gets tracked in my budget. I spend so little cash that when I take it out of the ATM it comes out of my spending money account. I think the last time I went to the ATM was six months ago and I took out $40. I have about $25 left.


Darwin May 27, 2012 at 11:52 am

I like to carry some cash for emergencies or dining out with others if not splitting the bill perfectly, but use credit for the most part.


Leave a Comment

Previous post:

Next post: