You will be able to explain how payment methods change how much spending hurts and how much you spend.
Darren once withdrew S$200 in cash for a weekend away in Malacca because a friend told him card payments were patchy there. He came back with S$60 left and a clear memory of every note he'd handed over. The following weekend in Singapore, paying by phone, he spent about the same amount and couldn't have told you where half of it went. Same person, same kind of weekend, very different sense of what it cost.
The economists Drazen Prelec and George Loewenstein used the phrase pain of paying for the small, unpleasant feeling that comes with handing money over. That feeling has a job. It's a brake, a moment where the cost becomes real and you ask yourself whether the thing is worth it.
How strong the brake is depends a lot on how you pay. Counting out notes makes the cost visible and physical: you see the money leave, and you see what's left. Tapping a card or a phone makes the payment almost invisible. There's no counting and no shrinking wallet, and the total arrives weeks later on a statement, mixed in with everything else.
Several studies over the years have found that people are willing to spend more, or remember spending less, when they pay by card instead of cash. Not every study agrees, and the size of the difference varies a lot between them, so it would be wrong to say that cards always make everyone spend more. The safer reading is that payment methods which hide the cost can weaken the brake, and that it's worth checking whether they do for you.
Buy now, pay later takes the same idea further. A pair of S$600 headphones becomes "3 payments of S$200" or "4 payments of S$150", shown in large type next to the price. The smaller number is the one that gets compared with your budget, and S$150 feels like a different kind of decision from S$600.
The split also moves most of the pain into the future. You feel the first instalment, and the others arrive later, after the pleasure of the purchase. Present bias, which module 5 covers, makes future payments feel lighter than payments today, so the split price feels cheaper than it is even when no interest is charged.
The cost of BNPL itself, the late fees and the way several small plans add up to one large problem, belongs to Credit and debt: scores, cards, loans and BNPL, especially lesson 4.3, Why several small plans become one big problem. Here the point is narrower. BNPL changes how a price feels at the moment you decide, and that changes whether you buy.
The other thing modern payments remove is the pause. With saved card details, a one-tap checkout and an app that remembers your address, the time between wanting something and owning it can be a few seconds. There's no point where you take out your wallet, no screen asking you to type sixteen digits, nothing that gives the slower part of your mind a chance to speak.
Instalment plans on bank cards do something similar for large purchases. A S$2,400 laptop converted to twelve monthly payments of S$200 at the till never has to pass the test of "can I afford S$2,400 today". Subscriptions are the same idea stretched over time: you decide once, and then the payment happens every month without asking.
None of this is a reason to go back to cash for everything. Cards have real advantages, including protection against fraud and a record of what you spent. The point is to know which methods mute the cost for you, and to put the brake back where you need it.
Darren checked his last five purchases that he hadn't planned that morning. A S$38 lunch delivery, paid with a card saved in the app. The S$96 of concert merchandise from his log, by BNPL in four parts. S$24 of snacks and drinks at a convenience store, tapped with his phone. A S$59 game top-up, through his app store account. A S$45 taxi ride after drinks, card saved in the app.
Not one involved cash, and not one involved typing anything in. Four of the five used details saved in an app, which meant his only decision was a single tap. When he added them up, the five came to S$262, which was more than he'd spent in the Malacca weekend he remembered so clearly.
He didn't conclude that cards were the problem. He concluded that the saved details were, and that's where lesson 4.4 and module 8 will pick this up.
Go back through your own recent spending and find the last five purchases you didn't plan, along with how you paid for each one.
Write the payment method you used for your last five unplanned purchases.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).