Paper or Plastic? The Effect of Time on the Use of Check and Debit Cards at Grocery Stores

48 Pages Posted: 2 May 2006  

Elizabeth Klee

Board of Governors of the Federal Reserve System

Date Written: February 2006

Abstract

Time is a significant cost of conducting transactions, and theoretical models predict that transactions costs significantly affect the type of media of exchange buyers use. However, there is little empirical work documenting the magnitude of this effect. This paper uses grocery store scanner data to examine how time affects consumer choices of checks and debit cards. On average, check transactions take thirty percent longer than debit card transactions. This time difference is a significant factor in the choice to use a debit card over a check and offers empirical evidence for transactions costs affecting the use of media of exchange.

Keywords: Payment systems, consumer behavior, checks, debit cards

JEL Classification: G20, D12, E41

Suggested Citation

Klee, Elizabeth, Paper or Plastic? The Effect of Time on the Use of Check and Debit Cards at Grocery Stores (February 2006). FEDS Working Paper No. 2006-02. Available at SSRN: https://ssrn.com/abstract=899120 or http://dx.doi.org/10.2139/ssrn.899120

Elizabeth Klee (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and Constitution Ave NW
Washington, DC 20551
United States

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