Belief in paranormal psychic phenomena is widespread in the United States, with over a third of the population believing in extrasensory perception (ESP). Why do some people believe, while others are skeptical? According to the cognitive differences hypothesis, individual differences in the way people process information about the world can contribute to the creation of psychic beliefs, such as differences in memory accuracy (e.g., selectively remembering a fortune teller's correct predictions) or analytical thinking (e.g., relying on intuition rather than scrutinizing evidence). While this hypothesis is prevalent in the literature, few have attempted to empirically test it. Here, we provided the most comprehensive test of the cognitive differences hypothesis to date. In 3 studies, we used online screening to recruit groups of strong believers and strong skeptics, matched on key demographics (age, sex, and years of education). These groups were then tested in laboratory and online settings using multiple cognitive tasks and other measures. Our cognitive testing showed that there were no consistent group differences on tasks of episodic memory distortion, autobiographical memory distortion, or working memory capacity, but skeptics consistently outperformed believers on several tasks tapping analytical or logical thinking as well as vocabulary. These findings demonstrate cognitive similarities and differences between these groups and suggest that differences in analytical thinking and conceptual knowledge might contribute to the development of psychic beliefs. We also found that psychic belief was associated with greater life satisfaction, demonstrating benefits associated with psychic beliefs and highlighting the role of both cognitive and noncognitive factors in understanding these individual differences.