Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response

Posted: 2 Jul 2021

See all articles by Shaista Ahmed

Shaista Ahmed

affiliation not provided to SSRN

Ron Borzekowski

Yale University

Elizabeth K. Kiser

Board of Governors of the Federal Reserve System

Date Written: 2006

Abstract

Debit card use at the point of sale has grown dramatically in recent years in the U.S., and now exceeds the number of credit card transactions. However, many questions remain regarding patterns of debit card use, consumer preferences when using debit, and how consumers might respond to explicit pricing of card transactions. Using a new nationally representative consumer survey, this paper describes the current use of debit cards by U.S. consumers, including how demographics affect use. In addition, consumers' stated reasons for using debit cards are used to analyze how consumers substitute between debit and other payment instruments. We also examine the relationship between household financial conditions and payment choice. Finally, we use a key variable on bank-imposed transaction fees to analyze price sensitivity of card use, and find a 12 percent decline in overall use in reaction to a mean 1.8 percent fee charged on certain debit card transactions; we believe this represents the first microeconomic evidence in the United States on price sensitivity for a card payment at the point of sale.

Suggested Citation

Ahmed, Shaista and Borzekowski, Ron and Kiser, Elizabeth K., Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response (2006). FEDS Working Paper No. 2006-16, Available at SSRN: https://ssrn.com/abstract=3877809

Shaista Ahmed (Contact Author)

affiliation not provided to SSRN

No Address Available

Ron Borzekowski

Yale University ( email )

493 College St
New Haven, CT CT 06520
United States

Elizabeth K. Kiser

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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