Do digital wallets make you overspend? And how to stop overspending

15th October 2022

Digital payment solutions, typically known as digital wallets, typically come in the form of an app. With digital payments done using digital wallets, you don't need to enter your card information or carry a physical card at all to make purchases because the wallet securely saves virtual debit and credit card equivalents. Additionally, you can store electronic tickets and coupons in the system so that you always have the paperwork you require. There are many different digital wallet apps available. What matters most is your situation, where you are, and the type of smartphone you have. For iPhone users, Apple Pay is the preferred option, whilst Google Pay is the preferred option for Android users. Other people might use PayPal since it is widely accepted.

A digital wallet links your payment information from your associated bank account to the merchant you're making the transaction with via software.

Open wallets, which are approved by the majority of businesses enable online purchases, cashbacks, and contactless in-store payments. They may even permit withdrawals at some ATMs.

Semi-closed and closed wallets, on the other hand, only permit certain transactions with the issuing retailer, or just with that retailer.

The Impact Of Digital Wallets On Spending

Spending more when using a method other than cash is not a new phenomenon. Researchers discovered that people were willing to spend more when they shifted from using cash regularly to credit and debit cards. Consumers frequently feel instant pain after making a payment, which might reduce how much pleasure they get from consumption. One illustration they give is how the sound of a taxi meter makes people less happy to ride because they know they'll have to pay for it. However, using a credit card to make a purchase, or in this example, a mobile wallet, decreases connection because there is no instant discomfort.

Benefits Of Digital Wallets

1. Deals & Promotions

To encourage users, e-wallets often provide perks and cashback. In actuality, using an e-wallet makes it simpler to spend and keep track of the incentives you earn. You continue to get benefits. You will still receive cashback or other incentives if your card offers them when you use it as mobile wallet. It can even be simpler to accrue rewards if you always carry your virtual card. To boost market share, an e-wallet firm might collaborate with various retailers to offer users enticing deals. So, keep an eye out for opportunities to earn money while performing routine tasks like filling your car, doing your grocery shopping, or even topping up your mobile credit. However, kindly refrain from using these incentives as a justification for overspending!

2. Convenience

People's behaviour and, naturally, how they consume things are impacted by how much time they spend on their smartphones. Individuals are more at ease using their credit cards on their smartphones than they are with the plastic cards in their physical wallets as people use their smartphones for longer periods. Two-factor authentication, tokenisation, and clearly stated security protocols are frequently included in digital wallets. As a result, it is difficult to steal credit card information, and the digital wallet payment procedure reduces the likelihood of fraud and improves security. An e-wallet provider must offer a high-security system because it relies on acquiring and maintaining the trust of consumers. Digital wallet tokenisation solutions lessen the risk of security breaches compared to standard card transactions, while two-factor authentication lowers fraud. Additionally, the ability to save and organise payment information gives customers knowledge about their usage and value-added services.

3. Tracks Your Transactions

Do you frequently experience a shock while viewing your bank balance? Unaware of where the money went? You can quickly check your e-wallet, which keeps track of all transactions. The days of losing track of your financial transactions are long gone. Keeping track of your everyday spending is essential to developing sound money management practices. This gives you a general idea of your spending habits and insights into where you can make improvements.

4. Time Saver

Since the payment is completed in under a minute, such an app enables the lines in the stores to move much more quickly. The digital wallet saves time when making purchases online because it already has the credit card information and identification verified.

How To Stop Overspending

1. Take Time To Think About Your Purchases

We have to put in more effort and time to make up for our losses when we overspend money. This not only robs us of our time but also diverts it from the people we love and the things we love to do. Is that new device really worth the hassle?

Saying NO is a necessary skill if you want to tame the ferocious beast of want. It takes practise to say no, just like everything else. Start by declining little requests. Avoid adding an additional spoon of sugar to your coffee. When you already own five pairs of shoes, refuse to buy another pair. We learn how to say no more frequently when we exercise restraint.

Finally, remember that we are frequently most tempted when we are resisting. When we resist a desire or try to cease a habit too quickly, we frequently think about the original problem. That explains why so many people give up on their exercise or diet plans. We push ourselves too hard and try to attempt everything. We feel defeated and revert to our old behaviours when we don't succeed in achieving the desired results.

2. Set A Spending Limit

Even though digital money has been available for some time, some people still tend to overspend when they are unable to see and touch actual money. It implies that managing your budget may be difficult, even if you can track and evaluate your expenditure via an online banking account or a digital wallet. You must be aware of your finances to prevent overspending. If your monthly spending limit is RM500, for instance, only add RM500 to your e-wallet and make sure it lasts the entire month! You'll know you need to change your spending habits if you run out of credit before the month is done. As a reminder to stay within your budget, wait to reload until the next month.

2. Don't Opt In For "One-Click" Purchases

Although a one-click purchase might be useful, there are instances when you might want to turn it off. The goal of one-click purchases is to provide a simpler, alternative checkout procedure in which the number of forms a consumer must fill out is reduced to just one. Customers' information is stored and encrypted by retailers like Amazon and Apple, enabling them to check out later with just a tap of their finger. Consider steering clear of this as a consumer.

3. Understand Your Spending Triggers

An emotion that makes us succumb to the temptation to spend is known as a spending trigger. Spending triggers typically persuade you to spend money to intensify or replace an emotion, whether positive or negative. Being prompted typically leads to an impulsive, unexpected purchase.

Spending triggers can lead to a wide range of different expenditures, including going out to dinner and buying tangible items like home decor, children's toys, or new shoes for yourself. You can also be spending money on something for convenience or enjoyment purposes.

Happy or sad emotions might be connected to triggers. Some folks become triggered after a very nice day and others on particularly unpleasant days. It is a daily struggle to maintain impulse control because some people are triggered by both.

If you're having a fantastic day, you might decide to treat yourself to some money because you feel like celebrating. You tell yourself, "I deserve this; I should treat myself."

Maybe the situation is reversed. Your day is not going well. You may be upset or depressed for some reason. Even if the alleviation is only momentary, when you're feeling bad, you spend money to try to make those sensations go away. Alternatively, perhaps you splurge when you're bored.

When you're around other people, do you tend to spend more money? In a group of friends, some people might experience a trigger. I should spend money, since they appear to be doing so. Peer pressure is a very genuine emotion that is connected to many people's triggers for overspending.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/