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How Currency Denomination and the ATM Affect the Way We Pay

Oz Shy ()

No 2019-2, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

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 United States 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 (search for similar items in EconPapers)
JEL-codes: D9 E42 (search for similar items in EconPapers)
Pages: 24
Date: 2020-03-01
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
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DOI: 10.29338/wp2019-02b

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Handle: RePEc:fip:fedawp:2019-02