Daniel Thorpe, of Hoboken, N.J., uses the Amazon app to pay for his purchase at the Amazon 4-star store in the Soho neighborhood of New York, on Sept. 27, 2018. More and more financial institutions are making round-up apps available.As a graduate student, Avni Shah used to buy her coffee with her debit card. One day she forgot it at home so she paid for her daily coffee with cash, but she noted two peculiar things about the experience.
Don Wright, a recently retired investment broker in Pickering, Ont., has never used a bank machine in his life. He cuts up the debit cards his banks send him and uses cash whenever possible. Dr. Shah noted that earlier work in this field looked at how using credit cards influences the pain of payment. The payment doesn’t show up until up to 30 days later when you get your credit card statement. Because the temporal coupling is very loose, the connection of the exchange of the pain of payment for whatever we’ve consumed is weakened.
Our society’s shift away from dollars and cents and toward plastic payment has important implications. Dr. Shah notes that when we learned about money as kids, one thing that was valuable was being able to see money – think piggy banks, clear jars – and conceptualize it more concretely. From a financial literacy perspective, physical cash is king. If the next generation isn’t as exposed to physical money growing up, they may have less understanding about all things financial.