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Cash versus card: Payment discontinuities and the burden of holding coins

Heng Chen (), Kim Huynh () and Oz Shy ()

Journal of Banking & Finance, 2019, vol. 99, issue C, 192-201

Abstract: This paper provides new insights on consumers payment choice by comparing cost of paying with cash to paying with cards. Our novel method accounts for how much change is received in the form of banknotes and metal coins, assuming that the weight and size of coins are inconvenient to carry. We use the regression discontinuity design approach to estimate the model using the 2013 Bank of Canada Method-of-Payments Survey and find a significant number of cash users who switch to paying with debit or credit cards at transaction values marginally above $5 and $10. We attribute this finding to the burden of receiving coins as change associated with the currency denomination structure. Our proposed methodology is general and can be applied to other countries and institutional details.

Keywords: Burden of holding coins; Consumer payment choice; Regression discontinuity (search for similar items in EconPapers)
JEL-codes: D03 E42 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Cash Versus Card: Payment Discontinuities and the Burden of Holding Coins (2017) Downloads
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