1. Money for MetroCards: How a New Card Fee Made New York Transit Riders Invest More and Lose More?
Meiping (Aggie) Sun
Columbia University
Abstract
Results
Since 1998, the New York City Metropolitan Transportation Authority (MTA) system has used prepaid cards (MetroCards) to collect subway and bus fares. In 2013, the MTA imposed a $1 card fee (surcharge) on new MetroCard purchases. After the card fee was imposed, riders started to put more money on new MetroCard purchases. The response to the card fee was greater in low-income neighborhoods and among riders who used cash or debit cards rather than credit cards. As a result, riders carried much larger unused balances on their cards, and over $20 million a year more money escheated to the MTA when these cards expired. These results may have implications for other markets.
Figure 3. Monthly Outstanding Balance from Pay-per-ride Deposits (January 2008 to April 2015)
Figure 4. Aggregate Leftover Balances on MetroCards Initially Purchased Between January 1, 2013 and April 30, 2013
Data
Deposit data
January 1, 2013 to May 31, 2015
All transaction-level MetroCard deposit data for
Location of card swipe
May 1, 2009 to September 30, 2009
Date and time
Type of swipe (time- or value-based)
December 1, 2012 to May 31, 2015
Trade-in and Trade-out Data
Each observation includes
Amount of money added to the card
Transfer money in (trade-in) and out (trade-out) across different MetroCards
Purchase location, date, and time
Type of deposit (new or refill)
January 1, 2012 to December 31, 2014
Payment Method (cash, debit, or credit)
Purchased at booth(teller) or vending machine
Location
Rides data
Amount of money transferred in and/or out
All transaction-level MetroCard swipe data for
Figure 5. Deposits on New Pay-per-ride MetroCard Purchases Before and After the New Card Fee from January 1, 2013 to April 30, 2013
Figure 6. Percent of Cash Deposits at Subway Stations Across Different Neighborhoods In New York City From January 2013 To April 2013
Heterogeneity: The changes in deposit amounts and forgone balances on expired cards largely came from cash or debit card payments rather than from credit card payments. Since low-income neighborhoods have a much higher percentage of cash payments compared to high-income neighborhoods (Figure 6), the new card fee is regressive as it induced poor riders to make larger deposits on new MetroCard purchases and lose more balances on expired cards.
MetroCard
Mechanism
Findings in this paper are consistent with a rational model that highlights:
The cost of effort to remember to bring the same MetroCard for future rides (ei)
The fixed cost of making deposits to MetroCards (ci)
Consumer uncertainty about future rides - probability of taking rides (qi)
* The main policy change for this paper is the imposition of $1 card fee on new MetroCard purchases.
Before the new card fee was imposed, riders in region C only deposited the fare of the first day's rides since the fixed cost to make deposits in the second day is smaller than the cost to remember to carry the same card to the second day and the risk of losing the deposit. After the new card fee was imposed, these riders switched to prepaying for rides in the second day as the fixed cost to make deposits and pay the new card fee is larger than the cost to remember to carry the same card for the next period and the risk of losing the deposit. As a result, they risk losing fare on expired MetroCards if they do not actually take rides in the second day
Figure 7. Illustration of the Threshold of Prepaying for Rides in the second day for N=2 (only 2 Days in NYC) case when no card fee is imposed and when a card fee is imposed.
Main Findings
Figure 2. Weekly Total Number of MetroCard Swipes from January 2011 to May 2015
Figure 1. Daily Sales of New Pay-per-ride MetroCards from January 1, 2013 to April 30, 2013
Implications
Contact
Meiping (Aggie) Sun
Columbia University
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