Low-Income Consumers and Payment Choice

Oz Shy
Working Paper 2020-3
February 2020

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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

https://doi.org/10.29338/wp2020-03Off-site link


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.

Please address questions regarding content to Oz Shy, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309, oz.shy@atl.frb.org.

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