Why Dirty-Looking Money Makes Us Spend More

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In a finding that gives a whole new meaning to the term “money laundering,” researchers found that people are driven to spend old or grimy bills more readily than newly-minted ones. In a forthcoming article in the Journal of Consumer Research, professors Fabrizio Di Muro of the University of Winnipeg and Theodore Noseworthy of the University of Guelph explored how spending behaviors are affected by how money physically looks.

We don’t like the idea of touching something that countless other people have also handled, and that ick factor is magnified when a bill is dirty, worn, or crumpled because we can see evidence that this cash has passed through a lot of hands before getting to ours. “Consumers may value a crisp banknote more than a worn banknote because they believe the latter is disgusting and thus want to be rid of it,” the study’s authors write.

“People actively seek to divest worn currency,” they conclude. In terms of consumer behavior, this means that if we have grimy, crinkled-up bills we’re more driven to spend — regardless of the need for a purchase. In an experiment, subjects given a worn-out $10 bill were more likely than those given a new, crisp $10 bill to participate in a gambling exercise where they could either lose their original $10 or win $20, even though the odds of losing the money were the same.

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The propensity to gamble away a worn bill was even higher for subjects who were shown a new, crisp $20 bill as their potential prize. More than two-thirds of subjects who had a ratty-looking $10 bill and were offered a new $20 bill chose to gamble, whereas less than a third of the subjects who had a new $10 and were offered a beat-up $20 chose to take the risk. In a similar follow-up experiment, a whopping 80% of subjects were willing to gamble away a worn bill for a new one, while only about 23% of subjects were willing to wager a new bill for a chance to win a worn one.

Di Muro and Noseworthy’s research also looked at how the appearance of money affects our perception of its value based on denomination. Earlier studies have shown that people are more likely to spend smaller bills than larger ones, a quirk researchers call the “denomination effect.” We value a $100 bill more highly than 20 $5 bills, even though the two are worth the same amount.

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“The nominal value between the bills is interchangeable, but the inferences consumers draw may not be,” they write.

Surprisingly, our aversion to “dirty” money is even strong enough to override the denomination effect. In a third experiment, subjects were more likely to spend a tattered $20 bill than four crisp $5 bills, even though conventional wisdom says they would view the $20 bill as being worth more. Another experiment found that although it’s less convenient, people will go out of their way to break a large-denomination bill when buying something if it’s grungy.

Aside from the ick factor, there’s a second factor at work in our unconscious here, too. Weird as it sounds, we’re proud to be in possession of new, crisp currency. Even though it’s just money, we value it more when it’s nice and clean because it makes us feel proud to have it, especially if we’re in a social setting where other people might see the bills. Think of it as an inversion of the idea of conspicuous consumption, where the valuable item is the money itself.

So if you ask your bank teller for $50s or $100s with the intention that larger denominations will help curb your spending, better be more specific and ask for new bills. Otherwise, you could find yourself spending thoughtlessly just to get rid of that beat-up cash.