Why Your Brain Treats Cashback as Income Not a Discount

Behavioral Economics with Fexingo: Decision Making, Bias, and How People Really Spend · Jul 3, 2026 · 7m · transcript

In this episode of Behavioral Economics with Fexingo, Lucas and Luna explore the 'cashback illusion' — why people treat cashback rewards as income rather than a price reduction, even when the math is identical. Using a 2025 experiment from the University of Chicago showing that consumers spend more freely with cashback than with an equivalent upfront discount, they unpack the mental accounting error that retailers exploit. They also discuss how credit card companies design rewards to feel like a bonus, not a rebate, and what that means for your spending psychology. A natural…