Behavioral economics, the coffee edition

Back in January, I received a gift card for my birthday to Cross Keys, a coffee shop about half a block from where I work. They're valid for 15 coffees: You get the card stamped each time, filling up the little grid on the back. It's very good coffee, by the way.

I liked using the card instead of fiddling with cash (I've never gotten into the habit of using credit cards for purchases that small) so after I used it up, I bought another one. And here's the thing: Even though I know perfectly well that I paid for it, it feels like I'm getting a free coffee every time.

It really does. And what a psychological difference there is between giving money and getting a stamp. The latter feels almost like an accomplishment: a coffee merit badge.

I've noticed a similar thing with EZPass: The payment is invisible. When I zip through a tollbooth, I know I should think, "There goes $7.43," or whatever it is, but I don't. Contrast that with feeding quarters into a vending machine to get a $1.75 soda. "Crap, is this thing expensive. @#%& inflation!"

The subjective friction of transactions matters a lot. It's nuts that I get more pleasure out of a gift-card coffee than a cash coffee, but I do. It's nuts that spending $1.75 at a vending machine irks me more than spending $17.50 on a restaurant meal, but pulling out a $20 bill or a credit card is quick and easy, so it does.

This is why I will never set up automatic bill pay, and it is no doubt why the utility companies keep insisting I should.