How Currency Denomination and the ATM Affect the Way We Pay

23 Pages Posted: 8 Jan 2019 Last revised: 18 Feb 2020

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Multiple version iconThere are 2 versions of this paper

Date Written: February 17, 2020

Abstract

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

Shy, Oz, How Currency Denomination and the ATM Affect the Way We Pay (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=3306463 or http://dx.doi.org/10.2139/ssrn.3306463

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

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