Monday, August 20, 2012

On a diet? Leave the credit card at home.

Unpacking groceries after a trip to the store is sometimes a process of discovery.  You have managed to get most of what you went to the store to purchase, but invariably a few items leapt off the shelves and into your cart as a result of impulse purchases.  Most of these impulse purchases are high-calorie high-fat foods like cookies, candies, or cakes.

There are lots of factors that can affect the number of impulse purchases you make in a shopping trip.  For example, there is evidence to support the feeling most of us have that we buy more food on trips to the supermarket when we’re hungry than we do on trips when we have just eaten.

An interesting set of studies by Manoj Thomas, Kalpesh Kaushik Desai, and Satheeshkumar Seenivasan in the June, 2011 issue of the Journal of Consumer Research suggests that your method of payment at the store may also affect your impulse purchases.

They suggest that many people find paying with cash as mildly painful.  That is, actually handing bills and coins to someone else really brings home the nature of spending.  Paying with a credit or debit card is less painful, because the numbers are more abstract.  Because you make impulse purchases in order to feel good, the authors suggest that paying with cash should decrease the number of impulse purchases that people make.

The researchers start by analyzing the purchase patterns of 1000 households at a grocery store.  The data for studies like this comes from people who use loyalty cards at supermarkets.  The loyalty cards allow stores to track your purchases over time.

The researchers separated purchases of foods that are not normally bought impulsively (like vegetables, baby food, and tea) from purchases of unhealthy foods that are often bought on impulse (like cookies and candy).  They found that people who paid with credit or debit cards tended to buy more of these unhealthy foods than those who paid with cash.  Spending on healthy foods did not differ across the methods of payment.

The researchers then did a series of studies in the lab.  In these studies, were shown pictures of 20 foods.  Half were healthy and half were unhealthy.  People were asked to pretend they were at the supermarket and they had to decide whether to purchase each of these products.  Before starting the study, the participants were either shown the logos of four major credit card companies and told that the store accepts credit cards, or they were told that the store only takes cash.

In these studies, participants chose more of the unhealthy items when they could pay with a credit card than when they could only pay with cash.  As with the analysis of the real purchases, there was no difference between groups in the amount of healthy food people chose.

Additional studies used surveys to measure how much pain people usually experience when making purchases with cash.  Those people who are most reluctant to spend cash are the ones who tended to avoid the unhealthy items when paying with cash.  Those people who do not find it at all painful to part with cash bought unhealthy foods at the same rate regardless of the method of payment.

What does this mean for you?  If you are trying to cut down on the amount of unhealthy food you buy, think a bit about your usual spending habits.  If you are stingy with your cash, then you will probably make fewer impulse purchases at the store if you pay with cash than with credit cards.  If so, then leave your credit cards at home when you go to the supermarket.

Finally, if you are worried about the number of impulse purchases you make, always bring a list to the supermarket.  You make fewer impulse purchases when you have a list than when you don’t.