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

43 Pages Posted: 16 Jun 2020

See all articles by John Gathergood

John Gathergood

University of Nottingham - School of Economics

Arna Olafsson

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May 20, 2020


Using detailed and highly-disaggregated data on spending, income, bank account balances, and consumer credit, we examine the tendency of individuals to “co-hold”, i.e., to simultaneously hold low-interest liquid deposit balances and high-interest debt in the form of overdrafts. The disaggregated nature of the data allows us to calculate co-holding at daily frequency, while prior studies have relied on more aggregated measures. Daily measures reveal that co-holding is less common than these prior studies have documented, occurring on approximately 15% of individual x days in our baseline calculations. Most spells of co-holding are also short, lasting less than one calendar month. The detailed data allow us to examine the empirical relevance of the competing explanations for co-holding. When brought to the data, we find that co-holding appears to be driven by behavioral rather than rational forces. More specifically, we find evidence in support of explanations for co-holding based upon mental accounting while we find rational explanations for co-holding to be empirically much less relevant.

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

JEL Classification: D12; D14; D15; G51

Suggested Citation

Gathergood, John and Olafsson, Arna, The Co-holding Puzzle: New Evidence from Transaction-Level Data (May 20, 2020). Available at SSRN: or

John Gathergood (Contact Author)

University of Nottingham - School of Economics ( email )

Sir Clive Granger Building
University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://

Arna Olafsson

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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