The theory of fungibility of money states that all money is
interchangeable and has no labels.
In contrast, as per the theory of mental accounting, people treat money
differently, depending on factors such as the money’s origin and intended use,
rather than thinking of it in terms of money being fungible in nature.
Examples of mental accounting may look like:
(a) Individuals spending money that they received unexpectedly or with little
effort (eg. tax breaks, lotteries, etc) more frivolously than they usually would
(b) Refusing to dip into emergency or even vacation savings to pay off a
high-interest loan, even though using that cash would save money overall
(c ) Companies marketing BNPL (Buy Now Pay Later) schemes as “interest-free
flexibility,” encouraging people to opt in even when they would not take in
traditional debt.