Why hitting ATM could save you money

Hitting the ATM might actually save you money, with new research showing that people spend more money when using cashless payment methods compared with paying in cash.

The research, from the University of Adelaide, supports the existence of a positive “cashless effect”, finding it leads to people spending more money when purchasing products used to signal status, like jewellery.

However, when it came to tipping and donations, researchers were surprised to find the cashless effect was not observed, with cashless payments not necessarily leading to greater tips or donations compared to those made with cash.

“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,” said University of Adelaide PhD Student Lachlan Schomburgk, who led the study, which was published in the Journal of Retailing.

To prevent spending more than planned, Mr Schomburgk recommended consumers carry cash instead of cards whenever they could because it “acts as a self-control method”.

“When using cash, people physically count and hand over notes and coins, making the act of spending more salient,” he said.

“If nothing is physically handed over, it’s easy to lose track of how much is spent.”

Mr Schomburgk said the research highlighted how payment methods influenced spending behaviour, which he said was an “overlooked” aspect of the “almost inevitable” transition towards a cashless society.

“This understanding can help empower us to make more informed purchasing decisions,” he said.

Mr Schomburgk, who conducted the study with the University of Adelaide’s Professor Arvid Hoffmann and Dr Alex Belli from the University of Melbourne, said the results were also important for businesses.

“Businesses should be aware that if they fail to embrace the cashless revolution, they might be unintentionally jeopardising their revenue potential,” he said.