The Pain of Paying: A Case Study on Why Tap-to-Pay Quietly Raises Your Spending

In 2001, two MIT researchers auctioned real Celtics and Red Sox tickets and randomly told some bidders they would pay by credit card and others by cash. The credit card group bid roughly twice as much for the exact same seats. That gap has a name, the pain of paying, and in this case study you will see how it shows up in an ordinary month of spending, what the research says about its size today, and a set of practical steps to put a little of that useful “sting” back into your purchases without going back to paper money.

The short version: paying hurts a little, that small hurt is a brake on spending, and modern payment methods have been engineered to remove it. You can’t stop using cards in 2026, but you can decide where you want friction and where you don’t.

What the Pain of Paying Actually Is

The idea comes from Drazen Prelec and George Loewenstein’s 1998 paper “The Red and the Black: Mental Accounting of Savings and Debt,” published in Marketing Science. Their model argues that every purchase is booked in two mental ledgers at once: the pleasure of what you get, and the pain of what you give up. Their favorite example is a taxi meter. Watching it tick upward during the ride makes the ride itself less enjoyable, because each click forces you to think about the cost while you’re consuming.

The key concept in that paper is coupling: how tightly the act of paying is tied to the thing you’re buying. Cash couples tightly. You count out bills, you watch your wallet get thinner, and the purchase and the payment happen in the same moment. Credit cards decouple. The charge disappears into a monthly statement where it’s blended with dozens of other transactions, and the actual money leaves your account weeks later.

Prelec and Loewenstein also predicted something that standard economics says shouldn’t happen: people often prefer to prepay for things like vacations, even though delaying payment is worth more in pure dollar terms. In their survey and conjoint analysis, their “double-entry” model fit the data better than a standard discounting model for 60% of subjects versus 29%. Paying up front means that later, the trip feels free. That same logic explains why flat-rate subscriptions feel painless and why the zero price effect makes “free” offers so powerful.

It shows up in the brain, too

In 2007, Brian Knutson, Prelec, Loewenstein and colleagues published “Neural Predictors of Purchases” in Neuron. They scanned people’s brains while they decided whether to buy products. Activity in the nucleus accumbens tracked how much people wanted the product. When an excessive price appeared, the insula, a region associated with anticipated loss and aversive feelings, activated, and the medial prefrontal cortex deactivated. In plain English: an expensive price tag registers as something close to a small injury, and that signal helped predict whether people walked away.

The Case Study: One Month, Three Ways to Pay

To make the pain of paying concrete, consider an illustrative scenario. This is a composite example, not a real person’s data, built to show how the mechanics play out.

Jordan is 31, earns a steady salary, and pays for nearly everything by tapping a phone or a credit card stored in apps. Jordan pays the card off in full every month, so there’s no interest, and Jordan considers this a responsible system. But Jordan also notices that “discretionary” spending is always higher than the number written in the budget, usually by a few hundred dollars, and can never quite explain where it went.

Jordan’s spending pattern isn’t unusual. According to the Federal Reserve’s 2025 Diary of Consumer Payment Choice (covering October 2024), U.S. consumers made an average of 48 payments per month. Cash made up only 14% of those payments, while credit cards accounted for 35% and debit cards 30%. Consumers also made an average of 11 payments a month with a mobile phone, and adults aged 18 to 24 used their phones for 45% of their payments.

Pew Research Center’s 2026 analysis tells the same story over a longer stretch: the share of Americans who use no cash at all in a typical week rose from 24% in 2015 to 42%. Credit cards’ share of payments climbed from 18% in 2015 to 34% in 2025, now the most-used method in the survey.

Here’s how the same month of Jordan’s discretionary purchases feels depending on payment method:

Notice the trend: almost every innovation in payments over the last 20 years has moved purchases down this table. That’s great for convenience and fraud protection. It’s not great for the internal brake that used to slow us down. Buy-now-pay-later is the extreme version, which is why its real cost is behavioral rather than the interest rate.

How Big Is the Pain of Paying Effect, Really?

The Celtics auction is the famous headline, but one study with sports tickets doesn’t tell you how much you personally overspend. Here’s what the broader evidence says.

The original auction. Prelec and Duncan Simester’s 2001 paper “Always Leave Home Without It,” published in Marketing Letters, randomly assigned real bidders to pay by cash or credit card in a sealed-bid auction. Willingness to pay was substantially higher in the credit condition, roughly double for the Celtics tickets. Importantly, the bidders weren’t credit-constrained. They could afford either way. The payment form alone changed what the tickets seemed worth.

The “Monopoly money” experiments. Priya Raghubir and Joydeep Srivastava’s 2008 paper in the Journal of Experimental Psychology: Applied ran four studies and found spending was lower with cash than with credit cards, scrip, or gift certificates. People spent more with a $50 gift certificate than with $50 in cash on the same shopping list. One useful twist: in their Thanksgiving dinner study, the cash-versus-credit gap disappeared when people estimated costs item by item. Itemizing restored the pain that the card had removed. That finding is the basis for several of the steps later in this article.

The 2024 meta-analysis. The most comprehensive look so far is “Less cash, more splash? A meta-analysis on the cashless effect,” by Lachlan Schomburgk, Alex Belli, and Arvid Hoffmann, published in the Journal of Retailing in 2024. It pooled 71 papers from 17 countries with more than 11,000 participants and confirmed a real cashless effect: people spend more when they don’t use cash. The effect was strongest for status-signaling products like jewelry. Interestingly, it did not show up for tips or donations, which suggests the pain of paying matters most when you’re buying something for yourself.

So the honest summary is: the effect is real and has been replicated across countries, but the “you’ll spend double” figure from one ticket auction shouldn’t be treated as a universal multiplier. It varies by product, by person, and by context.

Not everyone feels the pain equally

Scott Rick, Cynthia Cryder, and George Loewenstein’s 2008 study “Tightwads and Spendthrifts” in the Journal of Consumer Research surveyed more than 13,000 people and found tightwads outnumbered spendthrifts by roughly 3 to 2. Tightwads feel too much pain when paying; spendthrifts feel too little. Among credit card users, spendthrifts were three times more likely to carry debt than tightwads, even though income levels differed little between the groups. In other words, a muted pain of paying isn’t about how much you earn. It’s about how spending feels.

That matters on a national scale. The New York Fed’s Household Debt and Credit Report for Q3 2026 put U.S. credit card balances at a record $1.285 trillion, up $22 billion from the prior quarter. Not all of that is behavioral, of course, but a payment system that minimizes the felt cost of each purchase doesn’t help.

My Own Experiment With the Pain of Paying

I got curious about this a couple of years ago when I noticed my “miscellaneous” category kept beating its budget, even though I pay my card in full and track everything in a spreadsheet I built myself. As a software engineer, my first instinct was to automate the problem away, so I wrote a small script that pulled each transaction into a daily digest. It turned out the digest was the useful part, not the automation. Seeing yesterday’s purchases listed line by line every morning was a small, deliberate dose of the pain that tapping my phone had removed. My discretionary spending didn’t collapse, but it got noticeably more intentional, and I stopped being surprised at the end of the month. The lesson I took away: you don’t need cash to feel your spending, you need some moment where you actually look at it.

7 Steps to Use the Pain of Paying in Your Favor

The goal isn’t to make every purchase miserable. Tightwads suffer too, and research suggests they often under-spend on things that would genuinely improve their lives. The goal is to put friction where you overspend and remove it where you under-spend.

1. Find your leakiest category first. Pull the last three months of statements and identify the one category where actual spending most exceeds what you’d have guessed. For most people it’s dining out, app purchases, or online shopping. That’s where you want to add pain. Bills and savings transfers don’t need it.
2. Use cash for that one category only. You don’t need to go cashless-to-cash across your whole life. Pick the single leakiest category and pay for it in cash for 60 days. This is a lightweight version of the envelope method; our comparison of cash stuffing vs digital budgeting covers when each approach works best.
3. Remove saved cards from shopping apps. A saved card turns a purchase into a single tap. Making yourself type the 16 digits, expiration date, and CVV adds about 30 seconds of friction and a moment of reflection. It’s one of the simplest fixes in our guide on how to stop impulse buying online.
4. Turn on real-time transaction alerts. Most banks and card issuers let you get a push notification for every charge. This recouples payment with the purchase: the notification arrives seconds after you tap, while you’re still holding the thing you bought.
5. Itemize before you check out. Raghubir and Srivastava found the credit card spending gap vanished when people estimated costs item by item. Before you click “place order,” say or write down each item’s price individually instead of looking only at the total.
6. Translate prices into hours of work. Divide a price by your after-tax hourly wage. A $90 dinner might be 3 hours of work. That conversion reintroduces a concrete sense of what you’re giving up, which is exactly what the insula is reacting to in Knutson’s experiment.
7. Prepay the things you want to enjoy guilt-free. Prelec and Loewenstein showed prepaying makes consumption feel almost free later. Use that deliberately: fund a vacation or a hobby from a dedicated savings bucket in advance, so you enjoy it without the meter running. This is the healthy flip side of mental accounting — labeling money on purpose instead of by accident.

Back to Jordan

In our illustrative scenario, Jordan doesn’t give up the credit card or its rewards. Instead, Jordan identifies restaurant delivery as the leakiest category, deletes saved cards from the two delivery apps, turns on instant charge alerts, and starts a five-minute Sunday review of the week’s transactions. Nothing about the card changes. What changes is that every purchase is now felt at least twice: once at the alert, and once at the weekly review. That’s the whole strategy in a sentence: keep the convenience, restore the coupling.

When You Should Reduce the Pain of Paying

It’s easy to read this research and conclude that more pain is always better. It isn’t. The tightwad research found that people who feel too much pain when paying often skip purchases that would genuinely help them, like a better mattress, a needed medical visit, or a trip with friends. If you’re someone who agonizes over every $5 expense even when your savings rate is healthy, your problem is the opposite of Jordan’s.

For tightwads, the same science works in reverse. Prepaying for experiences, using a dedicated “fun money” account, and setting automatic transfers so your savings goals are already met before you spend can all reduce the pain enough to let you enjoy money you’ve already decided to spend. The question isn’t “How do I feel the most pain?” It’s “Is my pain level matched to my actual priorities?”

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Written by Chris Steve

Chris Steve is a software engineer with a deep interest in personal finance, behavioral economics, and AI. He started Money & Planet to share clear, research-backed money guides — the kind that explain the math instead of pushing products. His writing focuses on long-term wealth building, the psychology behind spending and investing decisions, and the practical tools regular people can use to make smarter financial choices.