How Debit Cards Enable the Poor to Save More
NBER Working Paper No. 23252
We study an at-scale natural experiment in which debit cards are given to cash transfer recipients who already have a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulate a savings stock equal to 2 percent 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, leading beneficiaries to check their account balances frequently and build trust in the bank.
Document Object Identifier (DOI): 10.3386/w23252
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