Keywords: Payment systems, consumer behavior, checks, debit cards
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.
Full paper (837 KB PDF)
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Last update: March 1, 2006