Cash Versus Cards: The Role of Budget Control

• Activity Number: 121
• Type: Topic Contributed
• Date/Time: Monday, August 5, 2013 : 8:30 AM to 10:20 AM
• Sponsor: Survey Research Methods Section
• Author(s): Anneke Kosse and Nicole Jonker*+ and Lola Hernández
• Companies: De Nederlandsche Bank and De Nederlandsche Bank and De Nederlandsche Bank
• Keywords: payment choice ; budget control ; cash ; card

Abstract

What is the role of budget and expenditure control in consumers' choice between payment instruments? We analyse this question using a rich set of 2012 data collected by means of an extensive payments diary survey among more than 7,000 Dutch consumers. We add to the existing literature on self-control and payment behaviour in that we distinguish between three types of budget-related needs: (1) the need to have an insight into total expenses, (2) the desire to keep track of the type of expenses, and (3) the need for budget control. Our preliminary results suggest that the desire for budget and expenditure control affects consumers' payment choice. Thanks to the rich dataset we are able to assess differences across individuals. Here we find that the need for control varies with a person's income, financial situation and risk aversion. Second, we present evidence of a significant role of self-control, mental ability and other personal characteristics in consumers' views on what payment instrument provides the best tool for tracking expenses and budgets. Yet, we show that all consumers tend to prefer this particular instrument over another when deciding how to pay.