Debit, Credit, or Cash: Survey Evidence on

Gasoline Purchases
Kenneth A. Carow and Michael E. Staten

We analyzed the consumer’s payment option to use debit, general purpose credit cards,
gasoline credit cards, or cash. Based on the results from a nested multinomial logit model,
we found consumers are more likely to use cash when they have less education, lower
incomes, are middle-aged, and own fewer credit cards. Debit and credit card users are
younger, more educated, and hold more credit cards. Respondents who use their debit card
are less likely to use their gasoline credit card. The results suggest that greater debit card
usage will place the greatest competitive pressure on the gasoline credit card
program. © 1999 Elsevier Science Inc.

Keywords: Payment choices; Debit; Credit

JEL classification: G21

I. Introduction
For three decades, experts on payment systems have forecast the imminent arrival of a
completely electronic, paperless payment system. The centerpiece of this revolutionized
payment system is the debit card, a magnetically-encoded plastic card which virtually
eliminates the need for cash or checks at the point of sale. Over 4,000 banks currently
issue off-line debit cards which are accepted wherever Visa or MasterCard are accepted.
In 1997, these cards were used by 21 million households in the United States, a 75%
increase in usage from 1994. Also in 1997, on-line debit cards (which double as ATM
cards) were accepted at 261,000 merchants, and in the hands of over 55 million house-
holds. The average annual transaction volume growth from 1990 through 1995 was 19%
for bank cards, 61% for on-line debit cards, 106% for off-line debit cards, and 14% for
ATM usage [Card Industry Directory (1997, p. 26)]. As recently as 1993, debit cards

Department of Finance, Kelley School of Business, Indiana University, Indianapolis, Indiana; Credit
Research Center, Georgetown School of Business, Washington, DC.
Address correspondence to: Dr. K. A. Carow, Indiana University, Kelley School of Business, Department of
Finance, 801 West Michigan Street, Indianapolis, IN 46202-5151.

Journal of Economics and Business 1999; 51:409 – 421 0148-6195 / 99 / $–see front matter
© 1999 Elsevier Science Inc., New York, New York PII S0148-6195(99)00016-8
410 K. A. Carow and M. E. Staten

accounted for approximately 2% of all retail store transactions.1 By 1997, debit cards were
used in over 1.4 billion transactions. Visa, U.S.A., has announced it hopes to lead the
industry to the point in 2001 when 10% of all consumer payments will be made with debit
cards [Keenan (1999)].
Using a survey of gasoline credit cardholders, we examined the consumer’s charac-
teristics and reasons for using cash, general purpose credit cards (i.e., Visa, MasterCard,
Discover, American Express), proprietary credit cards, and debit cards for retail gasoline
purchases.2 The retail gasoline market is a prime example of transactions traditionally
dominated by cash, but which have also long accepted plastic payment devices. The rise
of debit cards is causing many retailers, including oil companies, to re-evaluate the
purpose and viability of their proprietary (in-house) credit card programs [Lunt (1996)].
We used the survey evidence to assess how debit will impact the use of alternative
payment systems. Specifically, we asked the following questions:

1. What factors determine a consumer’s choice between cash and non-cash methods of
payment?
2. Among credit card users, what factors impact the choice of proprietary card versus
general purpose cards?
3. What are the characteristics of debit users versus non-debit users and how do these
characteristics compare with cash, general purpose card users, and gasoline card
users?
4. Are debit cards more likely to impact the frequency of cash or credit card usage?

II. Survey Techniques and Analytical Methodology

We focused our empirical work on the payment choices of consumers who own at least
one gasoline credit card and one general purpose credit card. Restricting the survey to
customers who own both types of cards ensures that consumers had a full range of
payment choices. The retail gasoline market also provides a homogenous group of
transactions. Inventory models suggest that payment size influences a consumer’s pay-
ment choice.3 By utilizing the gasoline retail environment, we controlled for payment size
by experimental design, as the transactions typically fell into a narrow range of $5 to $25.

The Data
We conducted a mail survey of gasoline credit cardholders during the spring and summer
of 1992. The Credit Research Center (CRC) at Purdue University provided questionnaires,
cover letters and envelopes to twelve participating oil companies with proprietary credit
card programs.4 The companies mailed 24,000 questionnaires to samples of their card-

1
This statistic reflects the use of on-line debit, off-line debit, and prepaid debit cards in 1993. [Caskey and
Sellon (1994)].
2
Previous literature on credit card usage includes Duca and Whitesell (1995), Boeschoten (1992), Lindley
et al. (1989), Hirschman (1982), and Martell and Fitts (1981).
3
See Whitesell (1989, 1992) for a review of inventory models of payment choice.
4
Participating companies include: Mobil, Total, United, Citgo, Phillips, Marathon, Cenex, Fina, Exxon,
Unocal, Conoco, and Chevron.
Debit, Credit, or Cash 411

holder base.5 The particular company sending the questionnaire was not identified to the
consumer. Consequently, the consumers’ responses relate to their general use of gasoline
credit cards and not to their behavior with respect to a specific company (unless they
owned only one gasoline card). Questionnaires were returned directly to the CRC. The
overall response rate was 25.9% (6451 total surveys). The sample size was reduced by
965, due to incomplete demographic and credit information. The sample was further
reduced by 322 respondents who did not have both a gasoline credit card and a general
purpose credit card, leaving a total of 5,164 useable responses.6

Logit Estimation Model

To analyze the respondent’s choice between debit and non-debit payment methods, we
used a multinomial logit model [Greene (1990, Ch. 21)]. To analyze the respondent’s
choice of cash, general purpose card, and gasoline card we used the generalized extreme
value (GEV) model (also called the nested multinomial logit model). Although the
multinomial logit model of choice is extremely robust, even when its underlying assump-
tions are violated, critics state that the property of independence of irrelevant alternatives,
also called the constant ratio rule, is too restrictive. This property implies that if a new
option is added to a choice set, the shares of existing options decrease in direct proportion
to original share size. For a gasoline station this new option may be allowing customers
to use a general purpose card, where the choices had previously been limited to only using
cash or the company’s own proprietary credit card. Based on the multinomial logit model,
the proportion of customers who will choose to use the general purpose card will draw in
proportion to the market share of those who previously used cash and those who
previously used a gasoline card. The GEV model relaxes this assumption. Maddala (1984,
Ch. 3) showed that the GEV model is superior to the multinomial logit model when a
sequence of decisions can be analyzed.
The use of the GEV model is a sequence of logit models. First, we analyzed the
estimates for a model of choice within a given subset (gasoline or general purpose credit
card). Second, we used the sum of the utilities for all the items in the subset (also called
the inclusive value) as an explanatory variable in a higher-level model of choice (cash
versus any credit card).

III. Analysis of the Payment Choice

Cash Versus Credit Decision and Gas Card Versus General Purpose Card
Decision
In the survey, we asked respondents the following question: “Please think about your
gasoline purchases over the past year. Indicate the approximate percentage of time you
used each of the four payment methods listed below for your purchase. If you never used

5
Several companies chose to divide their cardholders into two samples, active and inactive cardholders; from
these samples the companies then chose a random sampling of respondents. The response rate from active
cardholders was 26.5%, and the response rate from inactive cardholders was 23.5%. In all future analyses, tests
were done to determine if the inclusion of active versus inactive cardholders significantly influenced the
characteristics of the sample. When significant, these differences are discussed.
6
Exclusion of these 322 respondents did not significantly affect any of the results.
412 K. A. Carow and M. E. Staten

a particular method, write 0%.” The four methods include cash/check, debit card, gasoline
company credit card, and other credit card.7
We analyzed the cash versus credit decision through the use of a GEV model.8 For each
purchase, the respondent had the choice of using cash, a gasoline credit card, or a general
purpose credit card. The GEV model requires an analysis of the gasoline card versus
general card decision first (Table 12, Model 1). We incorporated the inclusive value from
the gas versus general credit card decision into the logit model analyzing the cash versus
credit decision (Table 1, Model 2). In Model 1, the dependent variable is equal to 1 if the
respondent used the general purpose card a larger percentage of the time than the gasoline
card. We assigned all other respondents a value of zero. We omitted 178 respondents who
only used cash during the previous year, leaving a sample of 4986 respondents. The
average value for the dependent variable was 16.4%, showing that 16.4% of respondents
used their general purpose card more frequently than their gasoline card. Independent
variables in Model 1 include demographic characteristics, credit characteristics, and the
reasons given for using a particular type of credit card. The dependent variable in Model
2 is equal to 1 if the respondent used credit cards (gasoline plus general purpose credit
card usage) a greater percentage of the time than cash (cash/check plus debit card usage).9
Of the respondents, 69.2% used credit more than cash. The independent variables in
Model 2 are the inclusive value calculated in Model 1, demographic variables, and credit
variables. Model 2 does not include responses about the importance of the general and
gasoline card attributes, because these attributes primarily relate to the gas versus general
purpose card decision.
The demographic characteristics were generally insignificant (exception: males were
more likely to use general purpose cards). However, the greater the number of general
purpose credit cards owned, the more likely the primary payment method was general
purpose credit cards. Similarly, the greater the number of gasoline credit cards owned, the
more likely gasoline credit cards were the primary payment method. Thus, respondents
revealed their preferences for a particular type of card through their card ownership. Bank
card revolvers were more likely to use a gasoline credit card as their primary payment
method. This finding is consistent with credit-constrained individuals utilizing a wider
variety of credit cards in order to keep the credit line on their general purpose cards open
[Jappelli (1990)]. Respondents also ranked their reasons for using proprietary cards and
general purpose cards (1 ⫽ “very important” to 4 ⫽ “not a factor”).10 The most important
reasons for consumers to use their general purpose credit cards were shopping with fewer
cards, and obtaining rebates and enhancements. However, general purpose card users
placed less importance on lower monthly payments. This is consistent with general
purpose card users being more concerned with the convenience of the card than its credit

7
Debit card users were not included in the nested logit analysis, as only 1% of respondents used debit as their
primary payment vehicle. Thus, analysis of debit card users was made separately from the nested logit model.
When the debit card users were added to the nested multinomial logit model, the results were inconclusive.
8
An ordered multinomial logistic model was also considered; however, no matter in which order the choices
of gas card, bank card, and cash were placed, the test for the proportional odds assumption showed that assuming
parallel lines was not consistent with the data.
9
The debit decision is not analyzed in this part of the paper, due to the infrequency of its use among
respondents (less than 1% of purchases).
10
Inclusion of the no-responses or exclusion did not impact the conclusions from Table 1. In Table 1, we
report the results including consumers which did not respond as a 5. Inclusion as a value of 4 also did not impact
the conclusions.
Debit, Credit, or Cash 413

function.11 A separate record for gasoline purchases was the most important reason to use
a gasoline credit card.12 Other significant factors in the decision to use a gasoline card
included keeping the account active to get sales notices, and not knowing whether a
general purpose card would be accepted.13
The slope coefficients give the change in the log of the odds ratio of choosing a general
purpose credit card. The change in the predicted probability of choosing a general purpose
credit card depends not only on the estimated coefficient, but also on the level of the
predicted probability from which the change is measured. The change in predicted
probability for a unit increase in variable Xi is equal to Bi(1 ⫺ P)*P, where Bi is the
estimated coefficient, and P is the initial predicted probability. For our hypothetical
respondent— 40 years of age, high school diploma, $40,000 income, single, female,
renting, with three general purpose cards, three gasoline cards—who rated all the reasons
for using a general purpose card with a 4, and who rated all the reasons for not using a
general purpose card with a 3, the predicted probability of choosing a general purpose
card, P, was 13.0%. If the hypothetical respondent was a male, the predicted probability
of using a general purpose card was 15.7%, an increase of 2.7% [.24*(1 ⫺ .13)*.13].
Owning one more general purpose card increased the predicted probability of using a
general purpose card by 1.4%, but owning one more gasoline card decreased the predicted
probability of using a general purpose card by 2.6%. If the hypothetical respondent had
considered the ease of shopping with one more card important enough to choose a 3
instead of a 4, the predicted probability of using a general purpose card would have
increased by 5.9%. Choosing a 2 instead of a 3 for record keeping would have decreased
the predicted probability of using a general purpose card by 6.1%.14
Model 2 of Table 4 provides the results from the GEV model concerning the cash
versus credit decision. The inclusive value is the simple exponential average of the strict
utility of credit card type. The coefficient of the credit card inclusive value term is
significantly different from zero and lies in the interval [0, 1]. This shows that the GEV
model is consistent with utility maximization [McFadden (1978)].15
Demographic variables are highly significant in the cash versus credit decision. A
U-shaped relationship for age is evident. Relative to consumers aged 35– 45, both younger
and older people are more likely to use credit cards. This is consistent with older
customers valuing the security of credit card usage and younger customers being budget-
constrained. Consistent with the convenience of having a payment source which does not
need replenishing, respondents with greater education and higher income use credit cards

11
Many gasoline cards do not permit fuel purchases to revolve, which means up to 100% minimum payment
for many users, but bank cards typically require only 2%–5% minimum payment.
12
It is interesting to note that the co-branded Shell Master Card, introduced subsequent to this survey, does
separate out gasoline purchases from other purchases.
13
Exclusion of the demographic and credit characteristics provided very similar results for Model 1. For
Model 1, keeping other credit lines open became positive and significant at the 5% level.
14
Unlike in linear programming, where the change in probability remains constant, the change in predicted
probability is highly dependent on the starting value of P (which is determined by the level of the other
coefficients). Due to this variability, any transformation of these original estimates must be done with caution.
Based on these concerns, we do not interpret the change in the predicted probability in the remaining logit
models, but provide the probability, P, for our hypothetical respondent in this footnote and footnote 20. For
Model 2, the probability for our hypothetical respondent was 31.69%. Our hypothetical respondent is not the
average respondent, but chosen to match with the omitted categories as stated in the footnotes to Table 1.
15
Omission of the inclusive value did not have a significant impact on the level or significance of the other
variables included in Model 2; however, it did cause a significant reduction in the explanatory power of the
model.
414 K. A. Carow and M. E. Staten

Table 1. Logit Model of Primary Payment Method

Gasoline Surveya

Model 1 Gas Card vs. Model 2 Cash vs. Any Credit

General Card Card

Parameter Parameter
Estimate t Value Estimate t Value

Constant ⫺0.43 (1.21) ⫺2.38 (10.60) **

Inclusive value 0.22 8.44 **
Age of Respondent:b
Younger than 25 0.25 0.74 1.04 4.20 **
25–34 0.01 0.05 0.33 2.97 **
45–54 0.17 1.23 0.26 2.59 **
55–64 0.23 1.54 0.22 2.03 *
65 or older 0.02 0.15 0.30 2.70 **
Highest Education Obtained:c
8th grade 0.64 1.41 ⫺0.19 (0.52)
9th–12th grade 0.23 0.74 0.12 0.52
Some college ⫺0.02 (0.12) 0.08 0.83
College degree 0.07 0.54 0.33 3.42 **
Total Income in 1991:d
Less than $20,000 ⫺0.25 (1.37) ⫺0.19 (1.55)
$20,000–$29,999 0.13 0.93 ⫺0.05 (0.54)
$50,000–$74,999 ⫺0.11 (0.83) 0.14 1.47
$75,000–$99,999 ⫺0.04 (0.23) 0.12 0.85
Greater than $100,000 ⫺0.19 (1.05) 0.31 2.17 *
Marital Status:e
Married 0.19 1.11 ⫺0.04 (0.35)
Divorced 0.06 0.31 ⫺0.15 (1.06)
Miscellaneous Demographics:e
Male 0.24 2.23 * 0.04 0.56
Home owner ⫺0.04 (0.27) 0.07 0.67
Card Ownership:f
Number of general purpose cards 0.12 4.40 ** 0.06 2.55 *
Number of travel and
entertainment cards ⫺0.07 (0.75) 0.09 1.23
Number of gas cards ⫺0.23 (7.40) ** 0.28 11.25 **
Frequency of Paying Credit Card
Balance:g
Pay full amount 0.64 5.64 ** 0.48 5.76 **
Hardly ever pay full amount ⫺0.34 (2.07) * 0.07 0.68
Cash vs. Credit Questions:
Importance of cash discounth 0.52 17.49 **
Frequency of self-servicei ⫺0.03 (0.68)
Reasons for Using General Purpose
Credit Cards:h
Lower interest rates ⫺0.07 (1.25)
Lower monthly payment 0.27 3.89 **
Rebates/enhancements ⫺0.31 (7.04) **
Ease of shopping with one card ⫺0.52 (13.92) **
Paid fee; use card 0.09 (1.54)
(table continued on next page)
Debit, Credit, or Cash 415

Table 1. (continued)

Gasoline Surveya

Model 1 Gas Card vs. Model 2 Cash vs. Any Credit

General Card Card

Parameter Parameter
Estimate t Value Estimate t Value

Reasons for Not Using General

Purpose Credit Cards:h
Record keeping 0.54 14.60 **
Keep account active to get sales
notices ⫺0.18 (3.35) **
Keep other lines open 0.06 1.36
Not sure if general card is
accepted ⫺0.08 (2.01) *
Sample size 4986 5164
Mean of dependent variable 16.4% 69.2%
⫺2 Log L 3229 5505
␹2 1216 872
p Value 0.0001 0.0001
Concordant 84.4% 74.6%
Goodness-of-fit statistic (p-value) 0.1550 0.1834
a
The samples are limited to those respondents with at least one general purpose credit card and one gasoline credit card.
b
Respondents in the 35–44 age group are the omitted category.
c
Respondents with a high school degree are the omitted category.
d
Respondents with $30,000–$49,999 income are the omitted category.
e
Indicator variables are equal to 1 if the respondent has the characteristic, and 0 otherwise.
f
Equal to the number of the type of card owned by the respondent. Values are from 1 to 10; respondents who answered that
they had more than 10 cards were given the value of 10.
g
Respondents who stated that they sometimes pay their balance in full are the omitted category.
h
Respondents ranked the importance of each reason as: 1) very important; 2) somewhat important; 3) not very important;
4) not a factor; and 5) no response.
i
Respondents ranked the frequency of full-service usage: 1) almost always use self-serve island; 2) use self-serve island more
frequently than full-serve; 3) use self-serve and full-serve about equally, 4) use full-serve more than self-serve, and 5) almost
always use full-serve islands.
This table utilizes a nested multinomial logit model to analyze the general purpose credit card versus gas credit card decision
in Model 1, and the cash versus any credit card decision in Model 2. In column 1, the dependent variable is equal to 1 if the
respondent stated they used a general purpose card more than a gasoline credit card, and 0 otherwise. If credit was never used,
the observations were omitted from Model 1, but used in Model 2. In column 2, the dependent variable is equal to 1 if the
respondent stated that they used credit (gasoline or general purpose cards) more than cash, and 0 otherwise.
*Significant at the .05 level.
**Significant at the .01 level.

more frequently. Marital status, sex, and home ownership did not differentiate between
credit and cash users.
Not surprisingly, the number of credit cards owned was positively related to the use of
credit. Convenience users were also more likely to use credit, while revolvers paid with
cash more frequently.
We also asked respondents to specify the importance of cash discount and self service
(1 ⫽ “very important” to 4 ⫽ “not important”). As expected, cash users considered
discounts to be more important.16 Respondents who used self-service were no more likely
to use credit than respondents who used full-service.

16
Given that all respondents owned at least one gasoline card, this result suggests that dropping the discount
for cash removed a major impediment to card usage. The elimination of virtually all national discount-for-cash
programs since 1992 suggests that oil company issuers recognized this, too. See Barron et al. (1992).
416 K. A. Carow and M. E. Staten

Preliminary Comparisons of the Characteristics of Debit Versus Non-Debit

Users
Debit card growth could significantly change consumer payment patterns. We provide an
analysis of debit and potential debit users in Table 2. For each of the three categories, we
examined differences in demographic characteristics, credit characteristics, attitudes to-
ward credit card usage, and frequency of payment method. The first category is for the
question “Have you ever used a debit card to make a purchase at a gasoline station,
grocery store, or other retail store?” The second category is for respondents who stated
that they have used a debit card for gasoline purchases.17 The third category is for the
question “If a company offered you a debit card, at no cost to you, and charged the same
price per gallon for debit card purchases as for cash purchases, would you be more likely
to use the debit card or cash?” Each category has three columns. The first column is the
mean value for respondents who stated they do not use debit or would not use debit. The
second column is the mean value for respondents who stated that they do use debit or
would use debit. The third column is a difference in means test.
The results are consistent for each of the three categories. Debit and potential debit
users are younger, have higher income, are more educated, are less likely to own their
home, and are less likely to be married. For the credit characteristics, debit card users
generally have more credit cards. Debit and potential debit users also consider the reasons
to use a general purpose card to be more important than non-debit users. In general, debit
card users are more likely to consider lower interest rates, lower monthly payments,
rebates, shopping with one card, and using a card due to having paid a fee to be important.
We did not find consistent differences between debit and non-debit users for responses to
the reasons for using gasoline cards.
The final section of Table 2, “Payment Frequency”, includes a summary of the percent
of purchases made via each payment method. Generally, debit card users and potential
debit card users made fewer cash purchases. This is consistent with the debit card serving
as a cash substitute. More importantly, respondents who used debit to pay for gasoline
purchases had significantly lower gasoline credit card usage than non-debit card users.
However, debit card users used their cash and general purpose cards approximately the
same percentage of the time as non-debit card users. Thus, for gasoline purchases, debit
card usage is a substitute for gasoline card usage. This has important implications for the
viability of proprietary card programs. Although there is some evidence of debit serving
as a cash substitute, the results based on consumers who have already switched to debit
card usage indicate that increased debit card usage will negatively impact gasoline credit
card usage.

Debit Versus Non-Debit Users

Using logistic regression in Table 3, we present the results for the characteristics of debit
versus non-debit users. In general, the results provide evidence consistent with debit users
having characteristics more closely related to credit card users than cash users, and
preliminary evidence that debit card users are more closely related to general purpose card

17
Gasoline purchases by debit were determined based on responses to question 4. If a respondent had ever
used a debit card, they were considered a debit card user. One-hundred, eighty of the respondents stated they
have used a debit card. Only 65 used a debit card as their primary method of payment.
Debit, Credit, or Cash 417

Table 2. Potential Debit versus Non-Debit Users

Have Used Debit for

Have Used Debit Gasoline Potential Debit User

No Yes No Yes No Yes

Variable Q2 ⫽ 0 Q2 ⫽ 1 DEBIT ⫽ 0 DEBIT ⫽ 1 Q3 ⫽ 0 Q3 ⫽ 1

Demographic Characteristics:
Age of respondent 49.93 45.60 ⫺ 49.60 45.91 ⫺ 49.89 48.28 ⫺
Income (six categories) 3.25 3.39 ⫹ 3.26 3.27 3.23 3.32 ⫹
Education (five categories) 4.26 4.41 ⫹ 4.27 4.28 4.23 4.33 ⫹
Male 0.67 0.62 ⫺ 0.66 0.67 0.67 0.65
Home owner 0.84 0.76 ⫺ 0.83 0.75 ⫺ 0.84 0.80 ⫺
Married 0.73 0.66 ⫺ 0.72 0.66 0.74 0.69 ⫺
Divorced 0.16 0.16 0.15 0.20 0.15 0.17
Credit Characteristics
Number of general purpose
cards 2.65 2.92 ⫹ 2.67 3.08 ⫹ 2.61 2.77 ⫹
Number of gas cards 3.00 2.94 2.99 2.97 2.91 3.06 ⫹
Number of travel and
entertainment cards 0.30 0.39 ⫹ 0.30 0.36 0.29 0.32
Frequency of paying credit
(three categories) 1.69 1.71 1.69 1.72 1.71 1.68
Cash versus Credit Questions (1
⫽ important, 5 ⫽ not a
factor):
Importance of cash discount 2.39 2.22 ⫺ 2.38 2.10 ⫺ 2.33 2.42 ⫹
Frequency of self serve 1.33 1.27 1.33 1.18 ⫺ 1.33 1.30
Reasons for Using General
Purpose Cards (1 ⫽
important, 5 ⫽ not a factor):
Lower interest rates 4.04 3.87 ⫺ 4.03 3.72 ⫺ 4.06 3.94 ⫺
Lower monthly payments 4.21 4.04 ⫺ 4.21 3.87 ⫺ 4.22 4.14 ⫺
Rebates/enhancements 4.11 3.86 ⫺ 4.10 3.69 ⫺ 4.15 3.98 ⫺
Ease of shopping with one
card 3.72 3.46 ⫺ 3.71 3.12 ⫺ 3.77 3.55 ⫺
Paid fee; use card 4.26 4.11 ⫺ 4.25 3.98 ⫺ 4.27 4.19 ⫺
Reasons for Using Gasoline
Cards (1 ⫽ important, 5 ⫽
not a factor):
Record keeping 2.51 2.49 2.50 2.68 2.56 2.42 ⫹
Keep account active to get
sales notices 3.73 3.67 3.73 3.68 3.75 3.66 ⫹
Keep other lines open 3.38 3.32 3.37 3.33 3.41 3.30 ⫺
Not sure if general card is
accepted 3.66 3.55 ⫺ 3.65 3.45 ⫺ 3.69 3.54 ⫺
Payment Frequency (in percent):
Cash 29.57 25.43 ⫺ 29.13 29.18 35.96 19.29 ⫺
Debit 0.09 5.44 ⫹ 18.95 ⫹ 0.07 1.65 ⫹
Gasoline card 60.34 60.02 60.95 42.31 ⫺ 55.31 67.44 ⫹
General purpose 9.65 10.24 9.65 11.83 8.41 11.55 ⫹
Total observations 4604 553 4984 180 3089 1909

This table provides the averages for each of the debit variables. To the right of each average is a test statistic. A (⫹) sign
indicates that the debit user had a significantly higher average value for this characteristic than the average potential non-debit
user at the 5% level of significance. A (⫺) sign indicates that the value was significantly lower at the 5% level. Neither a (⫹)
or (⫺) sign indicates no significant difference between the two values, based on a difference in means test. See the footnotes
to Table 1 for a description of each variable.
 418
Table 3. Logit Model of Debit Card Users Using Demographic and Credit Characteristics

Have Used Debit Have Used Debit for Gasoline Potential Debit User

Parameter Parameter Parameter

Estimate t Value Estimate t Value Estimate t Value

Constant ⫺1.86 (7.00) ** ⫺0.52 (2.94) ** ⫺3.29 (7.50) **

Age of Respondent:a
Younger than 25 ⫺0.24 (0.76) 0.42 1.99 * 0.14 0.27
25–34 0.20 1.38 0.20 1.98 * 0.11 0.46
45–54 ⫺0.01 (0.05) ⫺0.06 (0.65) ⫺0.08 (0.34)
55–64 ⫺0.28 (1.76) ⫺0.03 (0.29) ⫺0.31 (1.21)
65 or older ⫺0.44 (2.68) ** 0.00 0.03 ⫺0.69 (2.47) *
Highest Education Obtained:b
8th grade 0.16 0.21 0.23 0.64 ⫺21.51 (0.00)
9th–12th grade 0.56 1.66 0.02 0.08 0.74 1.66
Some college 0.35 2.16 * 0.12 1.29 ⫺0.01 (0.06)
College degree 0.39 2.51 * 0.19 2.06 * ⫺0.09 (0.36)
Total Income in 1991:c
Less than $20,000 ⫺0.15 (0.80) ⫺0.30 (2.60) ** ⫺0.20 (0.66)
$20,000–$29,999 ⫺0.10 (0.68) ⫺0.37 (4.02) ** 0.06 0.26
$50,000–$74,999 0.26 2.06 * 0.01 0.13 0.09 0.42
$75,000–$99,999 0.27 1.56 0.12 1.01 0.33 1.16
Greater than $100,000 0.23 1.26 ⫺0.04 (0.36) ⫺0.25 (0.73)
Marital Status:d
Married ⫺0.32 (2.07) * ⫺0.25 (2.35) * 0.05 0.20
Divorced ⫺0.15 (0.83) 0.00 (0.01) 0.48 1.60
Miscellaneous Demographics:d
Male ⫺0.19 (1.86) ⫺0.19 (1.40) 0.16 0.95
Home owner ⫺0.35 (2.58) ** ⫺0.14 (1.55) ⫺0.41 (1.86)
Card Ownership:e
Number of general purpose
cards 0.07 2.45 * 0.04 2.26 * 0.12 2.81 **
Number of travel and
entertainment cards 0.18 2.18 * 0.01 0.18 0.04 0.31
K. A. Carow and M. E. Staten

Number of gas cards ⫺0.04 (1.51) 0.04 2.38 * ⫺0.03 (0.65)

 Debit, Credit, or Cash

Table 3. (continued)

Have Used Debit Have Used Debit for Gasoline Potential Debit User

Parameter Parameter Parameter

Estimate t Value Estimate t Value Estimate t Value

Frequency of Paying Credit

Card Balance:f
Pay full amount ⫺0.04 (0.40) 0.15 2.06 * 0.00 (0.00)
Hardly ever pay full amount ⫺0.22 (1.64) 0.03 0.32 ⫺0.25 (1.13)
Sample size 5157 4998 5164
Mean of dependent variable 10.7% 38.2% 3.5%
⫺2 Log L 3414 6560 1523
␹2 100 88 39
p value 0.0001 0.0001 0.0185
Concordant 62.3% 57.3% 61.4%
Goodness-of-fit statistic (p
value) 0.7989 0.3235 0.3391
a
Respondents in the 35–44 age group are the omitted category.
b
Respondents with a high school degree are the omitted category.
c
Respondents with $30,000–$49,999 income are the omitted category.
d
Indicator variables are equal to 1 if the respondent had the characteristic, and 0 otherwise.
e
Equal to the number of the type of card owned by the respondent. Values are from 1 to 10; respondents who answered that they had more than 10 cards were given the value of 10.
f
Respondents who stated that they sometimes pay their balance in full are the omitted category.
This table utilizes a logit model to analyze the characteristics of debit card users compared to non-debit card users. In the first model, the dependent variable is equal to 1 if the respondent stated
that they have used a debit card in any type of purchase, and 0 otherwise. In the second model, the dependent variable is equal to 1 if the respondent stated that they used the debit card in a gasoline
purchase, and 0 otherwise. In the third model, the dependent variable is equal to 1 if the respondent stated that they might use the debit card in the future, and 0 otherwise. Only observable characteristics
are used in this table.
*Significant at the .05 level.
**Significant at the .01 level.
419
420 K. A. Carow and M. E. Staten

users than gasoline card users. The respondents’ demographic characteristics show that
debit card users are younger, more educated, less likely to be married, and less likely to
own their own home. The credit characteristics show that debit card users have more
general purpose credit cards; however, payment patterns do not provide any differentiation
between debit and non-debit card users. The debit card characteristics of having higher
income and having more education are similar to the characteristics of credit card users.
The fact that debit card users placed the greatest importance on the reasons for using a
general purpose card, and owned more general purpose cards provides evidence that debit
card users share similar characteristics with general credit card users.18

IV. Conclusions
In this study, we provided an analysis of the payment choices at gasoline stations, as well
as an in-depth look at the characteristics of actual debit card users and potential debit card
users in the gasoline retail context. We analyzed the cash versus credit card, the general
purpose credit card versus gasoline credit card, and the debit versus non-debit card
payment decisions.
For the cash versus credit decision, respondents with more education, greater income,
and a greater number of cards owned, and convenience users were more likely to use
credit than cash. Convenience, and not the borrowing capacity of credit, was the greatest
determinant of a credit card user. Given the decision to use credit, respondents with more
general purpose cards and convenience users were more likely to use a general purpose
credit card. Respondents with more gasoline cards and revolvers were more likely to use
a gasoline credit card.19 For revolvers, using a gasoline credit card keeps their general
purpose credit line available. General purpose card users placed the greatest importance
on reducing the number of cards held and receiving rebates. Record keeping was the most
important reason for using a gasoline card.
The characteristics of potential debit card users are similar to the characteristics of
credit card users. Those who indicated they had used or would use a debit card are
younger, more educated, and hold more credit cards. Furthermore, debit card users have
characteristics more closely related to general purpose card users than to gasoline card
users. Debit card users hold more general purpose cards, place greater importance on the
reasons for using a general purpose card, and are interested in a payment source which
reduces the number of credit cards carried. More importantly, respondents using their
debit cards for gasoline purchases had significantly lower gasoline credit card usage, but
did not have lower cash or general purpose card usage. These results suggest that the
respondents most likely to switch to debit card usage are gasoline card users with
characteristics more closely related to general purpose card users.

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18
Our hypothetical respondent had a predicted probability, P, of 14.6%, 43.1%, and 4.65% in Models 1, 2,
and 3, respectively. See footnote 14 for reference concerning greater interpretation of the estimated coefficients.
19
This is also consistent with revolvers being more likely to use cash than credit. Credit-constrained
consumers may also utilize cash as a budgeting mechanism.
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