Consumer Demand for Credit Card Services
51 Pages Posted: 19 Dec 2017
There are 2 versions of this paper
Consumer Demand for Credit Card Services
Date Written: December 2017
Abstract
We estimate how demand for credit card transacting, borrowing, and late payment responds to the interest rate and late payment fee. We find that lower rates increase borrowing and lower fees increase late payments. Prime cardholders demand for all services is decreasing in any price. In contrast, subprime cardholders borrow less when fees drop, a response consistent with models of limited attention. We calculate that a 2 percentage point rise in the Federal Funds rate decreases borrowing by 16 percent, or $130 billion, that this effect is greater in higher income communities, and that it exhibits geographic agglomeration.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Consumer Demand for Credit Card Services
This is a CEPR Discussion Paper. CEPR charges a fee of $8.00 for this paper.
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
