Aussie research shows why cash-free life is bad for your wallet

Cashless payments lead Australians to spend more, new research finds.

As the debate over a cashless society continues to boil, Australian researchers have shown that paying without cash does in fact lead to people spending more.

The study found that the "cashless effect" led people to spend more when purchasing products typically used to signal status, such as jewellery.

However, the same effect was not observed in cashless tips or donations.

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"Against our expectations, we found that cashless payments do not necessarily lead to greater tips or donations, in comparison to cash," said University of Adelaide PhD student Lachlan Schomburgk, who conducted the study with the University of Adelaide's Professor Arvid Hoffmann and Dr Alex Belli from the University of Melbourne.

"This indicates that traditional cash-based ways of collecting money, such as tipping jars and spiral wishing wells, are just as effective as cashless point-of-sale terminals to collect tips or donations."

Schomburgk said consumers should be mindful of the method they use to pay for goods or services, as this could help them spend less, particularly during the current cost-of-living crisis.

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"To prevent spending more than planned, we recommend consumers carry cash instead of cards whenever they can, as it acts as a self-control method," Schomburgk said.

"When using cash, people physically count and hand over notes and coins, making the act of spending more salient. If nothing is physically handed over, it's easy to lose track of how much is spent.

However, for many Australians, getting hold of cash is becoming harder, as bank branches shut down and ATMs become scarce.

Schomburg said the transition towards a cashless society was "almost inevitable".

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"I believe this research is crucial because it shines a light on an overlooked aspect of this transition: how payment methods influence our spending behaviour," he said.

"This understanding can help empower us to make more informed purchasing decisions."

He also said further research was important, with technological advancements giving rise to newer payment methods.

"Both buy now, pay later services and cryptocurrency payments have some unique features that are likely to have an interesting influence on payment behaviour," Schomburgk said.

"Given their novelty, there is currently limited academic research on both, which is where I believe future research is needed."

The study, which was published in the Journal of Retailing, was conducted by analysing 71 published and unpublished research papers from 17 countries, including data from more than 11,000 unique participants.

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