How Debit Cards Enable the Poor to Save More

Pierre Bachas, Paul Gertler, Sean Higgins, Enrique Seira

NBER Working Paper No. 23252
Issued in March 2017, Revised in August 2019
NBER Program(s):Development Economics Program

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.

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Document Object Identifier (DOI): 10.3386/w23252

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