Lottery vending machines are starting to take debit cards. Here is what the research says about paying with plastic

A new sticker has started showing up on California Lottery vending machines. A photo posted to Reddit by u/SuspiciousOrchid867, embedded below, shows an orange-and-blue label with the lottery's logo, reading Coming Soon above Debit Card Payments. For now the same machines take $1, $5, $10, and $20 bills, and the label beside the bill slot says no change is given. 

Georgia is already there. I have bought lottery tickets with a debit card at a Georgia Lottery vending machine. Its seven-year contract with IGT, announced in October 2022, called for debit payments on more than 10,000 retail terminals and for replacing 600 self-service vending machines. Kentucky goes further. Its vending machines accept Visa, Mastercard, and Discover credit, debit, and prepaid cards, plus Apple Pay, Google Pay, and Samsung Pay, with a cap of $150 per session.

What changes when the cash is gone

Economists who study payments have a name for the feeling of handing over money, the "pain of paying," a concept Drazen Prelec and George Loewenstein laid out in 1998. The less you notice money leaving, the less it hurts, and the easier it is to spend more.

A 2015 experiment at Copenhagen Business School tested that with debit cards specifically. Emma Runnemark, Jonas Hedman, and Xiao Xiao had people bid on the same products, some paying in cash and some by debit card. Average bids ran 22% to 54% higher with the debit card, and the gap held up after the researchers controlled for how much cash people had on hand. Their conclusion was that cash, being more visible, makes spending easier to keep in check.

An earlier study by Prelec and Duncan Simester found that people told to pay by credit card bid more for sports tickets than people told to pay cash. The effect showed up for the tickets, whose value was uncertain, and not for a dinner certificate with its value printed on it. A scratch-off has a fixed price, but what it will pay back is about as uncertain as a purchase gets.

A cash-only vending machine has a built-in limit of its own, the bills that are in your wallet. A card removes that limit, and Kentucky caps each card session at $150. A card also removes a quirk of cash machines that pushes the other way. On a machine that gives no change, like California's, a player who feeds in a $20 for a $5 ticket  has to spend the remaining $15. A card charges the exact amount of $5.

Where regulators have drawn lines

Britain's Gambling Commission banned the use of credit cards for gambling starting April 14, 2020, and applied it to online and in-person gambling alike, with one exception, lottery tickets bought in person. Debit cards were not part of the ban there, and debit is what Georgia has added and California says is coming.

The research describes averages across groups of people, and plenty of players set a budget and keep to it however they pay. On average, though, any extra money that goes into a machine comes back at the scratch-off rate, about 70 cents per dollar for the median US game, the same math behind feeding small wins back into more tickets and the yearly cost of a weekly habit.

Sources

Reddit, r/Lottery: photo of the California Lottery debit sticker, posted by u/SuspiciousOrchid867

Runnemark, Hedman, and Xiao (2015): Do consumers pay more using debit cards than cash?

Prelec and Simester (2001): Always leave home without it, Marketing Letters

Kentucky Lottery: Cashless vending

Kiosk Marketplace: Georgia Lottery partners with IGT on technology

Wiggin: Gambling Commission announces ban on credit cards from April 2020