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Why use debit instead of credit? consumer choice in a trillion-dollar market
| Content Provider | Library of Congress - Books/Printed Material |
|---|---|
| Author | Zinman, Jonathan. |
| Spatial Coverage | United States |
| Temporal Coverage | 2004 |
| Abstract | "Debit cards are overtaking credit cards as the most prevalent form of electronic payment at the point of sale, yet the determinants of a ubiquitous consumer choice--"debit or credit?"--have received relatively little scrutiny. Several stylized facts suggest that debit-card use is driven by behavioral factors. The popular view is that debit-card use presents a puzzle for canonical economic models. However, we should not overlook standard cost-based motives for using debit cards. Principally, the 50 percent of debit-card users who revolve credit-card balances would pay interest to charge purchases on the margin and hence might rationally choose to use debit rather than credit to minimize transaction costs. Debit-card use might also be rational for consumers lacking access to a credit card or facing a binding credit limit. I document robust effects of these types of credit-card use on debit use and show that such effects are consistent with a canonical model of consumer choice. This paper also shows, however, that it is difficult to distinguish sharply between canonical and behavioral motives for debit-card use in publicly available data. More generally, I develop analytical frameworks for testing competing canonical and behavioral models and find evidence consistent with important roles for both pecuniary and psychological motives"--Federal Reserve Bank of New York web site. |
| Language | English |
| Publisher | Federal Reserve Bank of New York, |
| Publisher Place | New York, N.Y. |
| Part of Series | Catalog |
| Requires | HTML5 supported browser |
| Access Restriction | Open |
| Subject Keyword | Consumer Behavior Credit Cards Debit Cards Mathematical Models United States |
| Subject Domain (in LCSH) | Debit cards--United States |
| Subject Domain (in LCSH) | Credit cards--United States |
| Subject Domain (in LCSH) | Consumer behavior--United States |
| Subject Domain (in LCSH) | Consumer behavior--Mathematical models |
| Subject Domain (in LCC) | HB1 |
| Content Type | Text |
| Resource Type | Book |
