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How Debit Cards Enable the Poor to Save More

Pierre Bachas, Paul Gertler, Sean Higgins and Enrique Seira

No 23252, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study an at-scale natural experiment in which debit cards are given to cash transfer recipients who already have a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulate a savings stock equal to 2 percent of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms: first, debit cards reduce transaction costs of accessing money; second, they reduce monitoring costs, leading beneficiaries to check their account balances frequently and build trust in the bank.

JEL-codes: D14 D83 G21 O16 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-ban, nep-pay and nep-soc
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Published as PIERRE BACHAS & PAUL GERTLER & SEAN HIGGINS & ENRIQUE SEIRA, 2021. "How Debit Cards Enable the Poor to Save More," The Journal of Finance, vol 76(4), pages 1913-1957.

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