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How the ATM Affects the Way We Pay


  • Oz Shy

    (University of Texas at Austin
    University of Texas)


Cash users withdraw money from automated teller machines (ATMs) to finance cash payments. However, most ATMs in the United States dispense only multiples of $20 bills. The paper first constructs a consumer's optimization model showing how the precise denomination of dollar bills available from ATMs affects consumers' decision whether to pay with cash or with (plastic) cards. Then, the paper uses various statistical techniques to conduct empirical analyses of consumers who choose to pay cash for transactions below a certain threshold payment amount and pay with cards for transactions exceeding that threshold.

Suggested Citation

  • Oz Shy, 2019. "How the ATM Affects the Way We Pay," FRB Atlanta Working Paper 2019-2, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2019-02
    DOI: 10.29338/wp2019-02

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    References listed on IDEAS

    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. Naoki Wakamori & Angelika Welte, 2017. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(1), pages 115-169, February.
    3. Chen, Heng & Huynh, Kim P. & Shy, Oz, 2019. "Cash versus card: Payment discontinuities and the burden of holding coins," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 192-201.
    4. Christopher Henry & Kim Huynh & Rallye Shen, 2015. "2013 Methods-of-Payment Survey Results," Discussion Papers 15-4, Bank of Canada.
    5. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2015. "Consumer payment choice: Merchant card acceptance versus pricing incentives," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 130-141.
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    More about this item


    currency denomination; automated teller machines; ATM; consumer payment choice; payment methods; point of sale;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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