Working Paper

How Currency Denomination and the ATM Affect the Way We Pay

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 denominations; automated teller machines; ATM; cash payments; consumer payment choice; payment methods; in-person purchases;

JEL Classification: D9; E42;

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Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2020-03-01

Number: 2019-2