Does how you pay influence the share of healthy items that you Buy? Assessing differences in nutritional quality of food purchases by payment type
Introduction
The use of credit and debit cards has been on the rise in the past decade. According to a 2016 Gallup poll, the share of Americans who report making most or all purchases with cash fell from 36 percent, in 2011, to 24 percent (Swift and Ander, 2016). Meanwhile, non-cash payments increased between 2012 and 2015 at an annual rate of 5.3 percent (Steele, 2019). With online shopping, virtual currencies, and mobile payment options, the use of cash as the primary payment method is likely to continue its decline. Less reliance on cash has several advantages for consumers. For one, many credit cards offer consumers award points or cashback. Credit and debit cards may also be seen as more secure than cash. If you lose your card, a call to your bank or credit card company will make that card inactive. If you lose a twenty-dollar bill, you are simply out of luck. However, a downside of paying with cards, rather than cash, is that consumers tend to spend more (Chatterjee and Rose, 2011, Feinberg, 1986, Hirschman, 1979, Prelec and Simester, 2001, Raghubir and Srivastava, 2008, Runnemark et al., 2015, Soman and Cheema, 2002), make more unplanned or impulse purchases1 (Baumeister, 2002, Feinberg, 1986, Thomas and Desai, 2011), and increase product waste and turnover (Shah et al., 2015).
One explanation for why payment type can impact what people buy is based on the finding that the link between the consumption experience and paying for that experience is tighter when paying with cash compared to paying with a credit card (Prelec and Loewenstein, 1998). This concept, known as coupling, refers to the degree to which consumption evokes thoughts of payments. Thus, when consumers pay with cash, they experience immediate pain and they are more likely to evaluate the cost of an item and more carefully consider whether or not they actually need it. In this sense, paying with credit cards tend to weaken coupling compared to paying with cash as people do not see physical money going away. Consequently, in the context of grocery shopping, the use of credit cards may nudge shoppers to make more unplanned or impulsive purchases, thus buying more unhealthful food items when paying with a credit card than when paying with cash (Thomas and Desai, 2011).
As a matter of fact, previous research has shown that consumers indeed make unhealthier food purchase decisions when paying with a credit card compared when they use cash. For instance, Soman (2003) ran a quasi-experiment from the field and found that shoppers tend to spend more on “flexible” items, such as treats and luxuries when paying with other payment types compared to cash. Incekara-Hafalir and Loewenstein (2009) ran a field experiment comparing credit-card and cash spending on lunch in a cafeteria at an insurance company. They found that credit cards do not increase spending, but those who do not carry any credit card debt spent more when induced to spend with a credit card. Just and Wansink (2014) used a national survey of 2,314 public school students in the United States to compare food purchases in schools with debit-only systems to those in schools with both debit and cash options. They found that students in debit and cash schools purchase more fresh fruit and vegetables and fewer total calories. Looking at a sample of actual purchases among 1,000 shoppers over a 6-month period, Thomas and Desai (2011) also found that consumers are more likely to buy a larger proportion of food items rated as impulsive and unhealthy when paying with a credit card than when paying with cash.
Therefore, a move away from cash may have negative effects on diet quality and health outcomes as well. Today, with obesity and low-quality diets being major public health concerns, finding ways to encourage consumers to choose a healthy mix of foods and beverages is critical (Dietary Guidelines Advisory Committee, 2015). Economic research into the causes of low-quality diets has primarily focused on the more standard economic factors that drive our food choices, such as dietary information, the price of healthy foods relative to unhealthy foods, and household access to various food outlets. However, it is also important to understand how situational factors, like how we pay for our foods, can affect the nutritional quality of the foods we choose.
An ancillary question is whether any effect of payment method on diet quality varies with where one is making food choices. Research has shown that food away from home tends to be lower in several markers of nutritional quality compared to food purchased for at-home consumption (Lin and Guthrie, 2012). Research also shows that individuals behave differently when purchasing food items to be consumed at home compared to items that are consumed away from home. For instance, Zeballos and Anekwe (2018) found that the use of nutrition information is positively associated with the healthfulness of food-at-home (FAH) purchases but has no significant association with the healthfulness of food-away-from-home (FAFH) purchases. This finding is consistent with the idea that some people tend to plan their food purchases at grocery stores and buy healthier food items while indulging themselves when eating out (Zeballos and Anekwe, 2018). Since FAFH continues to make up a large share of our total diet, (Saksena et al, 2018), examining whether the effect of payment type differs between food-at-home and food-away-from-home may help to focus public health messaging.
This study makes three contributions to the literature. First, it employs a unique dataset that allows us to study the effect of different payment methods on nutritional quality while controlling for individual-level characteristics. This data set collects detailed information about all foods purchased by all household members over a one-week period, and therefore, provides a number of different purchasing events for the same individual using different methods of payment. Second, this study is the first one to examine the differential effect of payment methods on the healthfulness of food-at-home versus food-away-from-home purchases. Third, the study uses the Guiding Stars Program (GSP) which allows to more objectively measure the healthfulness of food purchases at the event level.
Section snippets
Empirical specification
A simple estimation strategy would be to compare individuals who pay with cash to individuals who do not. However, this approach would almost undoubtedly yield biased estimates because choosing to use credit or debit cards for grocery purchases varies with a number of factors, such as income, age, culture, and education, that also influence dietary patterns and nutritional quality. For example, credit card companies target reward programs based on income, and the types and levels of rewards may
Data
The data for this study come from the USDA’s National Household Food Acquisition and Purchase Survey (FoodAPS). FoodAPS is a nationally representative survey of households in the United States that collected detailed demographic information as well as information on all foods and drinks purchased or otherwise acquired, by all household members over a one-week period. The information collected comprised all food and drinks that were brought into the home as well as meals, snacks, and drinks
Results
Estimation results of Eq. (1) indicate that the location where individuals make their food purchases significantly affects the share of healthy items they purchase, and in magnitude, this effect outsizes the effect of payment. Individuals purchase a lower share of healthy items when purchasing foods purchased for away-from-home consumption (FAFH) (i.e., at restaurants, schools, and work) compared with foods purchased for at-home consumption (FAH) (i.e., grocery stores and supermarkets) (Table 5
Discussion
In this paper, we use a nationally representative study of consumer purchases over a one-week period to test if cash leads individuals to buy a higher share of healthy foods. We have two main findings. First, shoppers purchased a slightly higher share of healthy food items when paying with cash than when paying with other methods of payment. Second, when separating food-at-home and food-away-from-home events, we find that the effect of cash on increasing the share of healthy items purchases is
CRediT authorship contribution statement
Eliana Zeballos: Conceptualization, Data curation, Methodology, Formal analysis, Writing - original draft. Lisa Mancino: Methodology, Writing - review & editing. Biing-Hwan Lin: Software.
Acknowledgments
The findings and conclusions in this publication are those of the authors and should not be construed to represent any official USDA or U.S. Government determination or policy. This research was supported by the U.S. Department of Agriculture, Economic Research Service. The authors declare no conflicts of interest. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
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