35 Pages Posted: 16 Jun 2017
Date Written: May 30, 2017
We survey individuals on their credit card usage. Contrary to popular opinion, most credit card holders use credit cards rationally. These individuals tend to use credit cards for transaction convenience and pay little interest costs. Only a minor subset of people uses credit cards to access expensive credit, with only 7% of credit card holders in our sample never paying the balance in full. Credit card debt is more common among older, less financially literate, and less trusting respondents. Even individuals with credit card debt are well informed about its costs and are likely to make rational decisions about it.
Keywords: Credit card debt, household finance, stock market participation, financial literacy, trust, rationality.
JEL Classification: D14; D91; G11
Suggested Citation: Suggested Citation
Brown, Stephen J. and Veld, Chris and Veld-Merkoulova, Yulia V., Do Individuals Use Credit Cards Rationally? (May 30, 2017). Available at SSRN: https://ssrn.com/abstract=2986714