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16 Jan 2010
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It costs to pay!

”At present it is impossible for consumers to see the costs of cash and card payments. These charges are made in the form of higher prices on goods and services. It is consumers and bank customers who ultimately pay the costs of all payments.” These comments were made by Deputy Governor Lars Nyberg in a speech held at the Financial Sector Union’s congress today.

Cash costs society more than cards. A study carried out by the Riksbank shows that a cash payment is on average 35 per cent more expensive than a card payment. The cost of a card payment is always the same, regardless of whether one uses the card to pay for a purchase amounting to SEK 50 or SEK 50,000.
At first glance it would appear that card payments, which are cheaper to produce, should replace cash completely. But it has been shown that the most cost-efficient payment form from society’s perspective varies according to the size of the payment. For payments below around SEK 70, cash is still the cheapest alternative for society. For transactions above this amount card payments are preferable, from the point of view of society. However, the study shows that the average consumer chooses to pay in cash for transactions up to SEK 123. The conclusion is that we use too much cash, from a welfare perspective.
The study is based on data from 2002, but there are many indications that the difference in costs to society between cards and cash has increased even more since then.
”When we consumers choose to pay in cash, which is more expensive for society to manage, we have to pay more in another way, as the mark-up on prices of goods and services increases. It is thus possible to save money for society and for us as consumers if we reduce the use of cash. A small charge for withdrawals from ATMs could contribute to influencing us in the right direction,” says Mr Nyberg.
Speech, Nyberg: It costs to pay - do we use too much cash | 182 Kb
Working Paper Series: The Costs of Paying – Private and Social Costs of Cash and Card Payments

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