Using data from our 2014 cost-of-payments survey, we calculate resource costs for cash, debit cards and credit cards. For each payment method, we examine the total cost incurred by consumers, retailers, financial institutions and infrastructures, the Royal Canadian Mint and the Bank of Canada.
The discrete choice to adopt a financial innovation affects a household’s exposure to inflation and transactions costs. We model this adoption decision as being subject to an unobserved cost.
Merchants who accept credit cards face payment processing fees. In most countries, the no-surcharge rule prohibits them from using surcharges to pass these fees on to customers.
The authors present the methodology and main findings of the Bank of Canada’s 2009 Methods-of-Payment survey, a detailed investigation of consumer payment behaviour in Canada. The survey targeted the 18- to 75-year-old Canadian resident population.
Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage.