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Using cash or credit card? Examination using behavioral economics

Uri Altlett’s research on the significance of the transition to credit, the dangers of relying on it as a means of payment, and the need for education and financial literacy in order to protect against these dangers.

Technological advances and public preferences are leading to a process in which paper-based means of payment, such as cash and check, will gradually disappear. This process takes place against the backdrop of the Israeli government’s decision to adopt the conclusions of the Locker Committee to examine the war on black capital and reduce the use of paper-based means of payment. Therefore, it is very important to examine the significance of increasing the use of electronic means of payment over paper-based means of payment among citizens. This examination must be conducted against the background of the increased processes of imparting financial education and literacy to the entire population in recent years.

A well-known fact based on circumstantial evidence from reality, which is regularly reflected in Paamonim’s activities, is that citizens who find it difficult to maintain a financial balance do not sufficiently notice the risks of risk-bearing economic activity, particularly risks that may lead to economic losses. One of Paamonim’s main recommendations for citizens who find themselves in these situations is to manage cash; This allows them to directly feel the budget constraints. This study attempts to examine the pattern of behavior of individuals when dealing with cash or credit cards, and the importance of financial education and literacy in preventing families from being dragged down unwanted paths. To do this, I examined the behavior of the individuals in an experiment (questionnaires). Half of the individuals in the sample received a questionnaire based on cash conduct, and the other half received a questionnaire based on credit card conduct.

Continue reading the study in the Van Leer Jerusalem Institute’s Journal of Economics and Society

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