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Timing to the Statement: Understanding Fluctuations in Consumer Credit Use

39 Pages Posted: 10 Dec 2012 Last revised: 27 Jun 2013

Sumit Agarwal

Georgetown University - Department of Finance

Amit Bubna

Indian School of Business

Molly Lipscomb

Batten School of Public Policy

Date Written: December 10, 2012

Abstract

We show that consumers spend 15% more per day on their credit cards in the ten days following the receipt of a credit card statement than in the days prior to the statement. We test several mechanisms for this effect including mental accounting, optimization of the free float, and liquidity constraints. We show the spending response to the credit card statement date across heterogeneous consumer types. Our results support mental accounting theories but not optimization of the free float or liquidity constraint explanations. Placebo tests show spending does not respond to credit card payment dates or randomized statement dates.

Keywords: Household Finance, Banking, Debit Card, Credit Cards, Consumer Behavior, Consumer Rationality, Bounded Rationality, Mental Accounting

JEL Classification: G2, D1, D3, D8, D12, D14

Suggested Citation

Agarwal, Sumit and Bubna, Amit and Lipscomb, Molly, Timing to the Statement: Understanding Fluctuations in Consumer Credit Use (December 10, 2012). Available at SSRN: https://ssrn.com/abstract=2187604 or http://dx.doi.org/10.2139/ssrn.2187604

Sumit Agarwal

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)

HOME PAGE: http://www.ushakrisna.com

Amit Bubna

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Molly Lipscomb (Contact Author)

Batten School of Public Policy ( email )

235 McCormick Rd.
P.O. Box 400893
Charlottesville, VA 22904-4893
United States

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