What do Consumers Really Pay on Their Checking and Credit Card Accounts? Explicit, Implicit, and Avoidable Costs

Abstract:     
We use novel administrative data containing every checking and credit card account transaction made by 917 consumers over two years to measure the total explicit and implicit costs that consumers pay across all of their bank and credit card accounts. In our sample the median household pays $43 in total bank and credit card account costs per month and the 90th percentile pays $257 per month ($3084 per year). For most consumers who pay economically significant costs, credit card interest is the largest component of total costs. For many consumers a large share of costs could be avoided relatively easily: the median panelist could avoid 60 percent of all credit card interest charges, overdraft fees, overlimit and late fees by using different cards at the point of sale, reallocating debt from high-interest to low-interest credit cards, or repaying credit card debt with available checking balances.

Keywords: household finance, credit cards, debit cards, overdraft fees, credit card fees, financial literacy

JEL Classifications: D1, D9, G11

Accepted Paper Series