IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v24y2017i1p1-26.html
   My bibliography  Save this article

Does an Overdraft Facility Influence the Customer Costs of Using a Personal Current Account?

Author

Listed:
  • John K. Ashton
  • Andros Gregoriou

Abstract

This study examines whether personal current accounts offering an overdraft facility cost customers less to use than accounts not offering this service. This analysis uses a UK data set of 222 personal current accounts, recorded monthly between 1995 and 2011, in combination with interest rates from 1200 instant-access deposit accounts offered contemporaneously by the same firms. Our results indicate personal current accounts offering overdraft facilities have higher deposit and payment service costs than accounts not offering this service. The finding is robust to varying service attributes. This result is inconsistent with suggestions that overdraft users have been cross-subsidising other personal current account users as widely reported in theoretical and policy literatures. It is concluded that implicit and inertia costs of personal current account use may be more influential than previously reported in the pricing of these accounts.

Suggested Citation

  • John K. Ashton & Andros Gregoriou, 2017. "Does an Overdraft Facility Influence the Customer Costs of Using a Personal Current Account?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(1), pages 1-26, January.
  • Handle: RePEc:taf:ijecbs:v:24:y:2017:i:1:p:1-26
    DOI: 10.1080/13571516.2016.1222990
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13571516.2016.1222990
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/13571516.2016.1222990?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Céline Gondat-Larralde & Erlend Nier, 2006. "Switching costs in the market for personal current accounts: some evidence for the United Kingdom," Bank of England working papers 292, Bank of England.
    2. Cambpbell, John Y. & Jackson, Howell Edmunds & Madrian, Brigitte & Tufano, Peter, 2010. "The Regulation of Consumer Financial Products: An Introductory Essay with Four Case Studies," Scholarly Articles 4450128, Harvard Kennedy School of Government.
    3. Schmiedel, Heiko & Kostova, Gergana & Ruttenberg, Wiebe, 2012. "The social and private costs of retail payment instruments: a European perspective," Occasional Paper Series 137, European Central Bank.
    4. Schmiedel, Heiko & Kostova, Gergana & Ruttenberg, Wiebe, 2012. "The social and private costs of retail payment instruments: a European perspective," Occasional Paper Series 137, European Central Bank.
    5. repec:spr:pharme:v:26:y:2008:i:2:p:91-98 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Junius, Kerstin & Devigne, Lucas & Honkkila, Juha & Jonker, Nicole & Kajdi, László & Rusu, Codruta & Kimmerl, Johana & Korella, Lukas & Matos, Rodrigo & Menzl, Nadine & Przenajkowska, Karolina & Reije, 2022. "Costs of retail payments – an overview of recent national studies in Europe," Occasional Paper Series 294, European Central Bank.
    2. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    3. Aurazo Jose & Vasquez Jose, 2019. "Merchant Card Acceptance: An Extension of the Tourist Test for Developing Countries," Review of Network Economics, De Gruyter, vol. 18(2), pages 109-139, June.
    4. Vânia G. Silva & Esmeralda A. Ramalho & Carlos R. Vieira, 2017. "The Use of Cheques in the European Union: A Cross-Country Analysis," Open Economies Review, Springer, vol. 28(3), pages 581-602, July.
    5. Valéry Dongmo Jiongo, 2017. "The Bank of Canada 2015 Retailer Survey on the Cost of Payment Methods: Estimation of the Total Private Cost for Large Businesses," Technical Reports 110, Bank of Canada.
    6. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," Working Papers on Central Bank Communication 036, University of Tokyo, Graduate School of Economics.
    7. Schmidt-Dengler, Philipp & Stix, Helmut & Huynh, Kim P., 2014. "The Role of Card Acceptance in the Transaction Demand for Money," CEPR Discussion Papers 10183, C.E.P.R. Discussion Papers.
    8. Françoise Vasselin, 2018. "The Competition Between Cash and Mobile Payments in Markets with Mobile Partnerships A Monetary Search Model Point of View," Working Papers hal-01722404, HAL.
    9. Shy, Oz, 2020. "Low-income consumers and payment choice," Research in Economics, Elsevier, vol. 74(4), pages 292-300.
    10. Nicole Jonker, 2013. "Social costs of POS payments in the Netherlands 2002-2012: Efficiency gains from increased debit card usage," DNB Occasional Studies 1102, Netherlands Central Bank, Research Department.
    11. John Ashton & Andros Gregoriou, 2014. "The role of implicit costs and product quality in determining the customer costs of using personal current accounts," Working Papers 14001, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    12. Dominika Kolcunova & Tomas Havranek, 2018. "Estimating the Effective Lower Bound on the Czech National Bank’s Policy Rate," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(6), pages 550-577, December.
    13. Hasan, Iftekhar & Martikainen, Emmi & Takalo, Tuomas, 2015. "Promoting efficient retail payments in Europe," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 8(4), pages 395-406, January.
    14. Morscher, Christof & Schlothmann, Daniel & Horsch, Andreas, 2017. "Bargeld quo vadis?," Freiberg Working Papers 2017/01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    15. Codruta Rusu & Helmut Stix, 2017. "Cash and card payments – recent results of the Austrian payment diary survey," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/17, pages 1-35.
    16. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2022. "Going Cashless: Government’s Point Reward Program vs. COVID-19," Working Papers on Central Bank Communication 040, University of Tokyo, Graduate School of Economics.
    17. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    18. Shy, Oz, 2021. "Cashless stores and cash users," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 622-638.
    19. Fumiko Hayashi, 2013. "The new debit card regulations: effects on merchants, consumers, and payments system efficiency," Economic Review, Federal Reserve Bank of Kansas City, vol. 98(Q I), pages 89-118.
    20. Carlos A. Arango-Arango & Yanneth R. Batancourt-García & Manuela restrepo-Bernal, 2022. "Costos del comercio en el procesamiento de los pagos en Colombia," Coyuntura Económica, Fedesarrollo, vol. 52, pages 107-125, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:24:y:2017:i:1:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.