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The Costs of Paying – Private and Social Costs of Cash and Card Payments

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Author Info

  • Bergman, Mats

    () (Department of Economics)

  • Guibourg, Gabriela

    () (Research Department, Central Bank of Sweden)

  • Segendorf, Björn

    () (International Secretariat)

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    Abstract

    Despite the central role of payments in theoretical and policy oriented economics, there is surprisingly little known about the costs of different payment instruments. We estimate social and private costs of cash, debit and credit card payments in Sweden in 2002. The combined social cost of providing these payment services is approximately 0.4 per cent of GDP. Debit and credit cards are socially less costly than cash for payments above EURO 8 and EURO 18, respectively. Corresponding thresholds for consumers’ private costs are somewhat higher. Data indicate a too extensive use of cash relative to card payments in terms of both private and social costs.

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    File URL: http://www.riksbank.se/upload/Dokument_riksbank/Kat_publicerat/WorkingPapers/WP212.pdf
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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 212.

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    Length: 37 pages
    Date of creation: 01 Sep 2007
    Date of revision:
    Handle: RePEc:hhs:rbnkwp:0212

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    Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
    Phone: 08 - 787 00 00
    Fax: 08-21 05 31
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    Web page: http://www.riksbank.com/
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    Related research

    Keywords: Cash payments; Card payments; Social costs; Private costs;

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    References

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    1. Daniel D. Garcia-Swartz & Robert W. Hahn & Anne Layne-Farrar, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, De Gruyter, vol. 5(2), pages 1.
    2. Hahn, Robert W. & Layne-Farrar, Anne & Swartz, Daniel D. Garcia, 2004. "The Move Toward a Cashless Society: Calculating the Costs and Benefits," Working paper 316, Regulation2point0.
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    Cited by:
    1. Bolt, Wilko & Jonker, Nicole & van Renselaar, Corry, 2010. "Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1738-1744, August.
    2. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
    3. O'Toole, Ronnie, 2013. "The Usage, Cost and Pricing of Retail Payments in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 74-84, April.
    4. Biliana Alexandrova-Kabadjova & José Luis Negrín, 2009. "What drives the network’s growth? An agent-based study of the payment card market," Working Paper Series 1143, European Central Bank.

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