Carrying Bigger Bills_ You_re Less Likely to Spend Them

Last week we talked about credit cards — and how you’re likely to spend more with cards than you do with cash (story link here). Today we’re talking about currency. According to a study, which appears in the Journal of Consumer Research, people are less likely to spend when they carry bigger bills. Therefore, you’re better off carrying a $100 bill than you are if you carry a $20 bill. From the Wallet:The two looked at what they call the “denomination effect” — how the size of bills in your wallet impacts how likely you are to spend them. Their research found that people spend less when carrying large bills. In short, you’re less likely to spend one $20 bill than you are to spend 20 one-dollar bills. It’s the “pain of paying”, they write.“With a credit card, you don’t see cash flow visibly happening before your eyes,” Prof. Srivastava says. “When you have a $100 bill, you want to save it.”It makes sense to us. Think of the last time you had a $100 or a $50. Would you crack one of those bills to buy a cup of coffee? Unlikely. (Not to mention that many stores and cafes don’t accept large bills.) But we think little of breaking a ten or a twenty for similarly small purchases. (This also explains why ATMs generally serve out tens and twenties — we’re apt to run through the cash quickly and come back for more.)Professor Srivastava, by the way, has also done research on credit-card use. He, too, agrees that using cards results in higher spending — as opposed to using cash. The irony? He still uses cards and he pays in full each month. Maybe he thinks he is the exception. Maybe he doesn’t think he will spend more with credit cards. Or maybe he doesn’t mind paying more when he uses a credit card. Whatever it is, I found it interesting that he still uses credit cards — when he knows, according to his study, that it results in higher spending.