How Currency Denomination and the ATM Affect the Way We Pay
23 Pages Posted: 8 Jan 2019 Last revised: 18 Feb 2020
Date Written: February 17, 2020
I show how currency denomination and the ATM influence consumers' choice of whether to pay cash for in-person purchases. I identify transaction values above which consumers switch from paying cash to paying with cards. The sharpest changes in the share of cash payments occur at $20 and $40 which coincide with the observation that most ATMs in the US dispense multiples of $20 bills. Other thresholds prevail at multiples of $5 and $10. The above thresholds generate asymmetries in consumer behavior where the share of cash payments increases for payments values just below the thresholds and decreases just above them.
Keywords: Currency denomination, automated teller machines, ATM, cash payments, consumer payment choice, payment methods, in-person purchases.
JEL Classification: D9, E42
Suggested Citation: Suggested Citation