Sager highlights a story about NYC cab drivers being required to let customers pay with credit card. The cab drivers resisted but are now making more money as a result:
The story boils down to loss aversion blinding the cabbies to two salient facts about credit cards: 1) They make people spend more, 2) They can be programmed with “default” tip amounts much higher than what drivers were typically receiving with cash.
The effect of credit cards on our spending is particularly striking. I think we all have an intuition that plastic makes us spend more. This study (PDF) shows that people will bid more than twice as much for an item (in the experiment, NBA tickets) when allowed to pay with credit card instead of being restricted to cash far more than even I would have guessed.