Low-Income Consumers and Payment Choice
Working Paper 2020-3
Low-income consumers are not only constrained with spending, but also with the type and variety of payment methods available to them. Using a representative sample of the U.S. adult population, this paper analyzes the low possession (adoption) of credit and debit cards among low-income consumers who are also unbanked. Using a random utility model, I estimate the potential welfare gains associated with policy options suggested in the literature to provide subsidized and unsubsidized debit cards to this consumer population.
JEL classification: D9, E42
Key words: consumer payment choice, household income, financial inclusion, unbanked consumers, random utility analysis
The author thanks Larry Wall for comments on an earlier draft. The views expressed here are those of the author and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author's responsibility.
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