Fighting Fiscal Awkwardness: How Relationship Strength Changes Consumers’ Approach to Resolving Peer Debt

Abstract

Financial interactions can be uncomfortable. The current research focuses on a particularly uneasy interaction consumers face with their friends and acquaintances: the need to ask for money back. Seven fully preregistered studies (N = 5,543) show that consumers’ approach to resolving peer debt varies based on their closeness with the other person. Specifically, consumers prefer communication methods low in social richness (e.g., digital apps) when requesting money back from weak social connections such as distant acquaintances, however, they prefer communication methods high in social richness (e.g., in-person interactions) when requesting money back from strong social connections such as close friends. Process evidence shows that this pattern occurs because, 1) consumers anticipate discomfort when requesting money back from distant acquaintances in person, driving them away from in-person requests and toward digital apps, and 2) consumers are more averse to appearing impersonal with close friends, driving them away from digital apps and toward in-person requests. In sum, consumers adaptively approach financial interactions based on the relationship dynamics at hand.

Keywords: financial decision-making, personal finance, debt, relationships, digital apps