Credit Card Revolvers

14 Pages Posted: 20 Aug 2019

See all articles by Daniel Grodzicki

Daniel Grodzicki

Penn State Economics

Sergei Koulayev

Consumer Financial Protection Bureau

Date Written: July 2, 2019


Credit cards are complex financial instruments that have become important as tools for managing household finances. They provide a safe and convenient method of paying for goods and services, at times with added benefits such as rewards. They also provide an open-ended line of credit from which to borrow, often at rates that are higher than other forms of available credit. At the end of each billing cycle, cardholders can repay their balances in full. In doing so, they are said to transact a balance. Alternatively, cardholders may choose to repay only a portion of their balance, borrowing the unpaid portion. In this case they are said to revolve a balance. Unlike more traditional fixed term installment loans, such as mortgages or auto loans, credit card revolvers may increase or decrease the balances they revolve over time. Repayments associated with any given balance can also vary greatly, with cardholders paying as little as the minimum payment due, or as much as the total outstanding balance as of the payment due date. As a result, cardholders may revolve for short periods or for many months or years.

This report studies patterns of revolving and repayment of credit card accounts in the United States. Using data from the Consumer Financial Protection Bureau’s (CFPB) Credit Card Database (CCDB), it examines how often balances are revolved on an account, or borrowed, how long balances are revolved, and how regularly they are paid down. Previous CFPB reports have focused on the level and cost of outstanding credit card debt. This current report focuses on the duration of credit card indebtedness and the manner by which credit card debt is repaid. The analysis shows that about two thirds of actively used credit card accounts carry a revolving balance. Once consumers pay less than the balance due and begin to revolve on an account, they do so continuously for about 10 months on average, with approximately 15 percent revolving continuously for two years or more on that account. The longer a balance is revolved, the higher the chances that the consumer will continue to revolve a balance on the account.

Accounts also show variation in their repayment patterns. Some revolvers appear to take on debt and then make regular payments on this debt. Others show signs of revolving a more-or-less constant amount for long periods with little pay down until a lump-sum payment of the balance in full. Still others show an increase in balances over the length of their revolving debt, with rapid pay down just prior to complete repayment. These revolver types are found among prime and subprime cardholders. This suggests there may be a variety of factors underlying revolving decisions among households; furthermore, the variation in repayment profiles is observed for both high and low credit score accounts, which implies that repayment is not easily predicted by cardholders’ credit score at the outset of revolving.

Finally, a cursory look at borrowing patterns across the United States reveals substantial geographic variation in both revolving rates and the duration of sustained debt periods. This
variation endures after accounting for differences credit scores just prior to revolving and is stable over time. This suggests that perhaps factors other than risk or market structure, such as for example preferences or local norms, may play a role in how and why individuals choose to revolve balances on their credit cards.

Suggested Citation

Grodzicki, Daniel and Koulayev, Sergei, Credit Card Revolvers (July 2, 2019). Consumer Financial Protection Bureau Office of Research Reports Series No. 19-3, Available at SSRN:

Daniel Grodzicki

Penn State Economics ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States

Sergei Koulayev (Contact Author)

Consumer Financial Protection Bureau ( email )

United States

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