Cash or Card: Consumer Perceptions of Payment Modes - Scholarly ...

and Belmont (1996) found that restaurant diners gave higher tips on tip trays containing
credit card symbols when compared to diners who received blank tip trays. McCall,
Trombetta, and Gipe (2004) found that credit card symbols had a similar effect on estimated
tip sizes in a laboratory setting. A New Zealand study by Lie, Hunt, Peters, Velin and Harper
(2010) found that negative associations with credit cards limit the use of such cards and limit
spending when used. Their study showed that participants were less likely to spend in the
presence of credit card logos. So the effects of the credit card logo are not clear. This may be
due to the research context and design or there may be cultural factors at play.
Payment mode effects- credit cards and cash
Studies since 2000 are primarily laboratory experiments. Prelec and Simester (2001)
compared behaviour across two payment modes. In their first study they auctioned tickets
(via a sealed-bid system) for a sporting event and allowed the use of cash or credit card
payment modes. The average price paid by the group who were expecting to pay by credit
card was significantly higher than the average price paid by the group who were expecting to
pay cash. In the second study they randomly assigned participants to a credit or cash payment
mode and assessed their willingness to pay for a $175 gift card to a local restaurant. They did
not find a difference. They argue that liquidity constraints cannot completely explain these
results. However, those participants could choose their payment mode in the first test and not
the second may be a factor, and in the second test the students may not have had an interest in
nor valued the restaurant voucher.
Soman (2001) examined the effect of past usage of payment mechanisms on future spending
behaviour by creating differences in the retrospective evaluation of past payments. He found
that consumers who normally use credit cards vs. cheque to pay for transactions in the test
situation were more likely to purchase an additional discretionary product. Raghubir and
Srivastava (2008) conducted four separate experiments in a single study to examine the
relationship between spending behaviour and the mode of payment. The first study replicated
the Feinberg (1986) study and found similar results - namely that individuals are willing to
spend more when exposed to a credit card logo. The second study examined willingness to
spend via cash and credit card by manipulating the amount of the transaction. First they
asked participants to estimate the cost of individual items to ascertain if it was considered to
be a small payment (cost), and once agreement was reached, their willingness to use cash or
their credit card to pay for each item was determined. Then the items were grouped together
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