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Payment Card Rewards Programs and Consumer Payment Choice

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  • Ching, Andrew
  • Hayashi, Fumiko

Abstract

We estimate the direct effects of rewards card programs on consumer payment choice for in-store transactions. By using a data set that contains information on consumer perceived attributes of payment methods and consumer perceived acceptance of payment methods by merchants, we control for consumer heterogeneity in preferences and choice sets. We conduct policy experiments to examine the effects of removing rewards from credit and/or debit cards. The results suggest that: (i) only a small percentage of consumers would switch from electronic to paper-based payment methods, (ii) the effect of removing credit card rewards is greater than that of removing debit card rewards, and consequently, (iii) removing rewards on both credit and debit cards would reduce credit card transactions, but increase debit card transactions.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8458.

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Date of creation: 23 Apr 2008
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Handle: RePEc:pra:mprapa:8458

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Keywords: Consumer Choice; Payment Methods; Rewards Programs; Interchange fees;

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