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THE PAIN OF PAYING (Psychology of Money) |

Health And Family

THE PAIN OF PAYING (Psychology of Money)


One Behavioral Economics (B.E.) principle that we ought to take note of is the Pain of Paying. If we were all super rational beings, it shouldn’t matter how and when we pay for a good or service that we avail of because we would always base our decision on the utility or satisfaction that we derive from the purchase, and the opportunity cost forgone by making the said transaction. But of course we’re not. We’re just emo human beings who are, as what the title of a great B.E. book is, Predictably Irrational.

What is the pain of paying? This is the principle that some purchases are more painful than others, and people try to avoid those types of purchases. Even if the actual cost is the same, there is a difference in the pain of paying depending on the mode of payment. In other words, purchases are not just affected by the price, utility and opportunity cost, but by the pain of paying attached to the transaction.

Let’s take a look what affects the pain of paying.

1. Cash vs. debit card vs. credit card. Studies show that we feel the pain of paying most when we use cold cash. The psychological effect of spending for something is higher when you physically hand over cash because it is more salient, more noticeable. Compare this with just signing a credit card slip. No immediate pain is felt, as your wallet does not become any thinner. You somehow dissociate the consumption from the payment, as the latter does not happen at the same time but in around 30 days from the transaction date.

Then there’s the middle ground debit card. You don’t hand in any cash but just swipe your card. Nonetheless, prior to swiping, you are informed of your current cash balance and you can also inquire for the remaining balance after the transaction is completed.

Do you notice how different your shopping, dining and other spending behavior is when you’re in a place that only accepts cash?

In cases when you want to curtail your spending, using cash and your debit card (so you don’t have to carry around a lot of cash) might be the more prudent options. Not only do you feel the pain of paying more, you also have an automatic stop once your money supply is finished.

The pain of paying is felt most when paying in cash, a bit less with debit card, and least with credit card.


2. Paid as a separate fee vs. included in the total purchase price. Do you also notice how most people would not be willing to pay for financial or other kinds of advice but would not mind buying the products sold that already tucked in the commissions and other fees? Again, it’s the salience of the amount they are paying that comes into play here.

Most of the time consumers refuse to pay stand-alone fees but are willing to pay the same when tucked in the purchase price of what they're buying.


3. Paid incrementally vs. one time.

Although the more cost efficient way for the consumer is to “pay as you consume,” this payment method sometimes disrupts and even reduces our utility or the satisfaction derived from the experience of consuming the good or service. Predictably Irrational author Dan Ariely talks about an experiment he did on charging his students per bite of pizza. Sure they spent less but the experience was terrible. They would have enjoyed their pizza experience more had they just paid for an equal share in the cost than be charged per bite. (See link provided below.)

Would you enjoy your pizza if you were charged by the bite?


4. Paid frequently vs. prepaid. Do you ever wonder why all those who go on a cruise rate their experience high on the satisfaction scale? Because vacations onboard a cruise ship are charged ahead of the vacation. It’s an all-in price that includes buffets, use of amenities, etc. The payment has been done ahead of time and so your attention is now focused on the enjoyment of the vacation, no need to be bothered whether to avail of a certain amenity, partake of the feast or not, just because of cost considerations. The spending decision has been made ahead of time and has been somewhat dissociated from the vacation experience. At the end of the cruise experience, what stays with you are the wonderful thoughts of the vacation.

Imagine if the payment is done at the end of the cruise. What would be the last emotion that would linger with you?

Do you know why cruise vacations are rated high on the satisfaction scale despite the cost?


5. Gifts and the pain of paying. I take pride in being frugal (Ilocana ngarud!), but I also like some of the fine things in life. I like good service, a little bit of jewelry and other forms of luxury that our family can afford (FQ Mom Guide: Buy luxury only if you can afford to buy 10 pieces of it!). Still, my genes sometimes get in the way that I don’t thoroughly enjoy paying for luxury myself. Here comes my husband to the rescue. On special occasions, he would give me gifts that he knows I want to have but just didn’t want to buy. So even if I know that he bought it using money from our joint bank account, I would still be delighted to receive those wonderful expensive gifts. Why? Because he took away the pain of paying from me! 

So in gift giving, especially for your loved one, this could be a good guide in buying an ideal gift. What is that thing that he/she really wants but is just prevented from doing so because of the pain of paying? Find out what it is then give it as a gift on a special occasion; of course, provided that you can already afford to buy 10 pieces of it! smiley

What's your ideal gift for your loved one? A luxury that he/she refuses to buy because of the pain of paying


With this knowledge of how the B.E. principle of the pain of paying can affect spending behavior, use the right mode of payment that will bring you the best combination. In cases when you want to cut down on expenses, increase the pain of paying. In cases when the spending has been properly evaluated and decided upon, remove the pain of paying in order to maximize your satisfaction from that purchase.

Cheers to a productive and happy use of pain!




1. Do you want to know your FQ Score? Click link below to take the test.

2. I will speak at the UST Financial Literacy Campaign and Promotion on October 24, 2016 at the Thomas Aquinas Research Complex Auditorium, University of Santo Tomas

3. I will speak at the Ateneo Paradigm Entrepreneurship Crash Course on November 11, 2016 at the Oakwood Joy Nostalg Center, Manila, Pasig City

4. I will speak at the Kerygma Conference on November 17, 2016 at the MOA Arena

5. Watch out for the continuation of my FQ talks in cooperation with Security Bank. Dates and venues to be announced.

Rose Fres Fausto is a speaker and author of bestselling books Raising Pinoy Boys and The Retelling of The Richest Man in Babylon (English and Filipino versions). Click this link to read samples - Books of FQ Mom Rose Fres Fausto. She is a Behavioral Economist, Certified Gallup Strengths Coach and the grand prize winner of the first Sinag Financial Literacy Digital Journalism Awards. Follow her on Facebook and You Tube as FQ Mom, and Twitter & Instagram as theFQMom.

ATTRIBUTIONS: Photos from,,,, ifwtwa.org432,,,, a put together to deliver the message of the article.

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