The Co-holding Puzzle: New Evidence from Transaction-Level Data

Abstract

Using detailed and highly disaggregated data on household finances, we examine the
tendency of consumers to “co-hold” savings and debt simultaneously. The disaggregated
nature of the data allows us to calculate co-holding at daily frequency. We find that coholding
is rare and mostly occurs in short spells within the month, but is a persistent
behavior among a subset of consumers. For this group, we find evidence in support of
explanations for co-holding based upon functional mental accounting in which agents
hold spending and saving accounts, while we find less support for rational explanations.

Keywords: co-holding, credit card puzzle, household finance

JEL Classification: D12; D14; D15; G51