← Search

Journal of Finance Vol. 76 No. 4 2021

How Debit Cards Enable the Poor to Save More

Pierre Bachas1,2,3; Paul Gertler1,2,3; Sean Higgins1,2,4,3; Enrique Seira1,2,3

1 National Bureau of Economic Research · 2 Instituto Tecnológico Autónomo de México · 3 University of California, Berkeley · 4 Kellogg's (Canada)

open access

Abstract

We study an at‐scale natural experiment in which debit cards were given to cash transfer recipients who already had a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulated a savings stock equal to 2% of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms. First, debit cards reduce transaction costs of accessing money. Second, they reduce monitoring costs, which led beneficiaries to check their account balances frequently and build trust in the bank.

DOI
10.1111/jofi.13021
Volume
76
Issue
4
Pages
1913-1957
Language
en
Sources
bibtex:phds-export.bib openalex crossref

Cite