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NEW EVIDENCE ON CREDIT CARD BORROWING AND REPAYMENT PATTERNS |
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| Authors: | SARAH S JIANG LUCIA F DUNN |
| Institution: | 1. Jiang: Manager, Credit and Business Strategy, Capital One Financial, McLean, VA 22102. Phone 703‐268‐9675, Fax 703‐720‐1932, E‐mail sarah.jiang@capitalone.com;2. Dunn: Professor, Department of Economics, Ohio State University, Columbus, OH 43210. Phone 614‐292‐8071, Fax 614‐292‐3906, E‐mail dunn.4@osu.edu |
| Abstract: | A new dataset allows researchers to examine patterns of credit card use for both borrowing and payoff. This article addresses changes in these behaviors for different birth cohorts by estimating cohort‐adjusted age profiles for debt and payoff rates based on a time series of cross sections. Younger consumers are found to be borrowing more heavily and repaying at lower rates than older generations. The accumulation of credit card debt is found to continue over the lifecycle. This has implications for recent changes in laws governing the credit card industry. Increases in minimum required payment rates are examined and are found to increase actual payoff rates more than proportionately. (JEL D12) |
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