Why Use Debit Instead of Credit? Consumer Choice in a Trillion-Dollar Market

Topics:
Commercial Banking
Tags:
Consumer Choice,
Federal Reserve Bank Of New York,
Financial Services,
Sales,
Sales Channel
Source:
Federal Reserve Bank of New York

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Overview: Debit cards are overtaking credit cards as the most prevalent form of electronic payment at the point of sale, yet the determinants of a ubiquitous consumer choice "debit or credit?" have received relatively little scrutiny. Several stylized facts suggest that debit-card use is driven by behavioral factors. The paper documents robust effects of these types of credit-card use on debit use and shows that such effects are consistent with a canonical model of consumer choice. This paper also shows, however, that it is difficult to distinguish sharply between canonical and behavioral motives for debit-card use in publicly available data.

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Format: PDF | Size: 529KB | Date: Jul 2004 | Pages: 50

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