The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data

Posted: 29 May 2020 Last revised: 3 May 2023

See all articles by Akos Horvath

Akos Horvath

Board of Governors of the Federal Reserve System

Benjamin S. Kay

Board of Governors of the Federal Reserve System

Carlo Wix

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: April 16, 2023

Abstract

We study the dynamic effect of the COVID-19 shock on credit card use in 2020. Local case incidence had a strong negative effect on credit card spending in the early months of the pandemic, which diminished over time. This time-varying pattern was driven by the fear of the virus, rather than government support programs, consistent with the “pandemic fatigue” of consumers. Local pandemic severity also had a strong effect on credit card repayments. These spending and repayment effects offset each other, resulting in no effect on credit card borrowing, consistent with credit-smoothing behavior. The local stringency of nonpharmaceutical interventions also had a negative effect on spending and repayments, albeit smaller in magnitude. We conclude that the pandemic itself was a more important driver of changes in credit card use than the public health policy response.

Keywords: credit card use, household spending and borrowing, COVID-19, nonpharmaceutical interventions, credit-smoothing

JEL Classification: D12, D14, G18, G21, G41, G51

Suggested Citation

Horvath, Akos and Kay, Benjamin and Wix, Carlo, The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data (April 16, 2023). Journal of Banking and Finance, Vol. 152, No. 1, 2023, Available at SSRN: https://ssrn.com/abstract=3613408 or http://dx.doi.org/10.2139/ssrn.3613408

Akos Horvath

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/akos-horvath.htm

Benjamin Kay

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/benjamin-s-kay.htm

Carlo Wix (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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