Arbeitspapier
Why do banks reward their customers to use their credit cards?
Using a unique administrative level dataset from a large and diverse U.S. financial institution, we test the impact of rewards on credit card spending and debt. Specifically, we study the impact of cash-back rewards on individuals before and during their enrollment in the program. We find that with an average cash-back reward of $25, spending and debt increases by $79 and $191 a month, respectively during the first quarter. Furthermore, we find that cardholders who do not use their card prior to the cash-back program increase their spending and debt more than cardholders with debt prior to the cash-back program. In addition, we find that 11 percent of cardholders that did not use their cards in the previous 3 months prior to the cash-back program spent at least $50 in the first month of the program. Finally, we find heterogeneous responses by demographic and credit constraint characteristics.
- Language
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Englisch
- Bibliographic citation
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Series: Working Paper ; No. 2010-19
- Classification
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Wirtschaft
- Subject
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Household Finance
Credit Cards
Consumption
Financial Incentives
Rewards
- Event
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Geistige Schöpfung
- (who)
-
Agarwal, Sumit
Chakravorti, Sujit
Lunn, Anna
- Event
-
Veröffentlichung
- (who)
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Federal Reserve Bank of Chicago
- (where)
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Chicago, IL
- (when)
-
2010
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Agarwal, Sumit
- Chakravorti, Sujit
- Lunn, Anna
- Federal Reserve Bank of Chicago
Time of origin
- 2010
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