An increasingly popular trend is for consumers to get paid more often, resulting in more frequent, yet smaller paychecks. However, surprisingly little is known about whether and how payment frequency impacts consumer behavior. The current work addresses this gap. We find that higher payment frequencies result in increased perceptions of wealth and more discretionary spending relative to lower payment frequencies. We first demonstrate a naturally occurring relationship between higher payment frequencies and increased discretionary spending using natural variation in payment frequency in a dataset of more than 27,000 consumers from a large financial institution. We then demonstrate a causal relationship between payment frequency and discretionary spending in a series of controlled lab studies. We show that higher payment frequencies lead to greater perceptions of subjective wealth, which explains the increase in discretionary spending. Finally, we demonstrate that the introduction of a daily pay option by a large employer led to an increase in discretionary spending among its workers in the months following. Beyond the contributions to the payment frequency literature, this work reveals that the implications of segregated and aggregated gains are broader than previously demonstrated and that the impact of gains to subjective wealth perceptions exhibit diminishing marginal returns.
Revise and resubmit at Journal of Consumer Research.
SCP Annual Conference Best Competitive Paper Award, Winner, 2020
Marketing Doctoral Student Association Conference, First Place Award, 2019