Credit card utilization and consumption over the life cycle and business cycle

Arbeitspapier

The revolving credit available to consumers changes substantially over the business cycle, life cycle, and for individuals. We show that debt changes at the same time as credit, so credit utilization is remarkably stable. From ages 20-40, for example, credit card limits grow by more than 700 percent, and yet utilization holds steadily at around 50 percent. We estimate a structural model of life-cycle consumption and credit use in which credit cards can be used for payments, precautionary smoothing, and life-cycle smoothing, uniting their monetary and revolving credit functions. Our estimates predict stable utilization closely matching the individual, life-cycle, and business-cycle relationships between credit and debt. The preference heterogeneity implied by the different uses of credit cards drives our results. The revealed preference that some people with credit cards borrow at high interest, while others do not, suggests that around half the population is living nearly hand to mouth.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Papers ; No. 17-14

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Household Saving; Personal Finance ; Intertemporal Household Choice; Life Cycle Models and Saving ; Macroeconomics: Consumption; Saving; Wealth ; Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications
• Thema: Credit cards ; life cycle ; consumption ; saving ; precaution ; buffer stock

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Fulford, Scott L. ; Schuh, Scott
• Ereignis: Veröffentlichung
• (wer): Federal Reserve Bank of Boston
• (wo): Boston, MA
• (wann): 2017

Weitere Informationen

• Handle: http://hdl.handle.net/10419/202913
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ