This might seem like a completely backwards question, especially when you consider the recent mega-breach of credit and debit card numbers at Target. But it could be that the wider adoption of credit cards and electronic payments contributed to huge decreases in crime rates in the United States in the 1990s.

Cards, after all, have built-in fraud protection: if someone takes your cards in a good old-fashioned mugging, you can report them stolen and limit your liability. That’s certainly not the case for cash.

A recent working paper from the National Bureau of Economic Research found some ideal data to figure out whether less use of cash really does decrease crime. The now-familiar Electronic Benefits Transfer (EBT) cards that replaced paper welfare checks in the 1990s rolled out in different parts of Missouri at different times. As people living in impoverished neighborhoods no longer have to cash their checks and carry large amounts of cash around, street crime should decrease. Right?

That is indeed what happened. The overall crime rate went down 16.6%, and rates of assault and larceny fell as well. What the change didn’t affect was the incidence of robbery: maybe, the researchers speculate, because robberies are relatively rare compared to lesser street crimes, so having less cash circulating in the local economy doesn’t affect the rate of robberies very much.

Less Cash, Less Crime: Evidence from the Electronic Benefit Transfer Program [NBER]
As Cash Use Drops, Do Crime Rates Follow? [Bloomberg Businessweek]

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