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Cash versus debit card: the role of budget control

Author

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  • Lola Hernandez
  • Nicole Jonker
  • Anneke Kosse

Abstract

Due to the financial crisis, an increasing number of households face financial problems. This may lead to an increasing need for monitoring spending and budgets. We demonstrate that both cash and the debit card are perceived as helpful in this respect. We show that, on average, consumers responsible for the financial decision making within a household find the debit card more useful for monitoring their household finances than cash. Individuals differ in major respects, however. In particular, low earners and the liquidity-constrained prefer cash as a monitoring and budgeting tool. Finally, we present evidence that at an aggregated level, such preferences strongly affect consumer payment behaviour. We suggest that the substitution of cash by cards may slow down because of the financial crisis. Also, we show that cash still brings benefits that electronic alternatives have been unable to match. This suggests that inclusion of enhanced budgeting and monitoring features in electronic payment instruments may encourage consumers to use them more frequently.

Suggested Citation

  • Lola Hernandez & Nicole Jonker & Anneke Kosse, 2014. "Cash versus debit card: the role of budget control," DNB Working Papers 429, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:dnbwpp:429
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    Citations

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    Cited by:

    1. Carlos Arango & Yassine Bouhdaoui & David Bounie & Martina Eschelbach & Lola Hernández, 2013. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," Staff Working Papers 13-53, Bank of Canada.
    2. Gustavo A. Del Angel, 2016. "Cashless Payments and the Persistence of Cash: Open Questions About Mexico," Economics Working Papers 16108, Hoover Institution, Stanford University.
    3. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    4. Eschelbach, Martina, 2017. "Pay cash, buy less trash? – Evidence from German payment diary data," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162908, Deutsche Bundesbank.
    5. repec:eco:journ1:2017-05-58 is not listed on IDEAS
    6. repec:kap:jfsres:v:52:y:2017:i:1:d:10.1007_s10693-017-0281-6 is not listed on IDEAS
    7. Carin van der Cruijsen & Mirjam Plooij, 2015. "Changing payment patterns at point-of-sale: their drivers," DNB Working Papers 471, Netherlands Central Bank, Research Department.
    8. Esselink, Henk & Hernández, Lola, 2017. "The use of cash by households in the euro area," Occasional Paper Series 201, European Central Bank.
    9. repec:bof:bofrdp:urn:nbn:fi:bof-201511251450 is not listed on IDEAS
    10. Frank van der Horst & Jelle Miedema & Daniël Schreij & Martijn Meeter, 2017. "Effects of payment instruments on unhealthy purchases," DNB Working Papers 582, Netherlands Central Bank, Research Department.
    11. Stavins, Joanna, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
    12. Roy Verbaan & Wilko Bolt & Carin van der Cruijsen, 2017. "Using debit card payments data for nowcasting Dutch household consumption," DNB Working Papers 571, Netherlands Central Bank, Research Department.

    More about this item

    Keywords

    payment surveys; cash; debit card; consumer choice; budgeting; financial distress; self-control;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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