Consumers' use of debit cards: patterns, preferences, and price response
AbstractDebit card use at the point of sale has grown dramatically in recent years in the U.S., and now exceeds the number of credit card transactions. However, many questions remain regarding patterns of debit card use, consumer preferences when using debit, and how consumers might respond to explicit pricing of card transactions. Using a new nationally representative consumer survey, this paper describes the current use of debit cards by U.S. consumers, including how demographics affect use. In addition, consumers' stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments. We also examine the relationship between household financial conditions and payment choice. Finally, we use a key variable on bank-imposed transaction fees to analyze price sensitivity of card use, and find a 12 percent decline in overall use in reaction to a mean 1.8 percent fee charged on certain debit card transactions; we believe this represents the first microeconomic evidence in the United States on price sensitivity for a card payment at the point of sale.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2006-16.
Date of creation: 2006
Date of revision:
Other versions of this item:
- Ron Borzekowski & K. Kiser Elizabeth & Ahmed Shaista, 2008. "Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(1), pages 149-172, 02.
- NEP-ALL-2006-05-27 (All new papers)
- NEP-CBA-2006-05-27 (Central Banking)
- NEP-FMK-2006-05-27 (Financial Markets)
- NEP-MON-2006-05-27 (Monetary Economics)
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