Andrew Sullivan points to an interesting post by Ryan Sager on New York City taxi drivers being required to let customers pay with credit cards, a move resisted by the taxi drivers.
The story boils down to loss aversion blinding the cabbies to two salient facts about credit cards: 1) They make people spend more, 2) They can be programmed with “default” tip amounts much higher than what drivers were typically receiving with cash.
…The effect of credit cards on our spending is particularly striking. I think we all have an intuition that plastic makes us spend more. This study (PDF) shows that people will bid more than twice as much for an item (in the experiment, NBA tickets) when allowed to pay with credit card instead of being restricted to cash — far more than even I would have guessed.
Bevan Sabo
Ariel Goldring
Guest Blogger
Is there any similar literature on the effect of debit cards?
I would expect them to be slightly easier to spend than cash, but less so than credit.
Unfortunately I am not aware of it.