Search Results
Showing results 1 to 5 of approximately 5.
(refine search)
Working Paper
Do consumers choose the right credit contracts?
A number of studies have pointed to various mistakes that consumers might make in their consumption-saving and financial decisions. We utilize a unique market experiment conducted by a large U.S. bank to assess how systematic and costly such mistakes are in practice. The bank offered consumers a choice between two credit card contracts, one with an annual fee but a lower interest rate and one with no annual fee but a higher interest rate. To minimize their total interest costs net of the fee, consumers expecting to borrow a sufficiently large amount should choose the contract with the fee, ...
Working Paper
The reaction of consumer spending and debt to tax rebates; evidence from consumer credit data
The authors use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates. They estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. They find that, on average, consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt. But soon afterward their spending increased, counter to the canonical permanent-income model. Spending rose most for consumers who were initially most likely to be ...
Working Paper
Benefits of relationship banking: evidence from consumer credit markets
This paper empirically examines the benefits of relationship banking to banks, in the context of consumer credit markets. Using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers, we estimate the effects of relationship banking on the customers' default, attrition, and utilization behavior. We find that relationship accounts exhibit lower probabilities of default and attrition, and have higher utilization rates, compared to non-relationship accounts, ceteris paribus. Such effects become more pronounced with ...
Working Paper
The reaction of consumer spending and debt to tax rebates – evidence from consumer credit data
We use a new panel dataset of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates. We estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. We find that on average consumers initially saved some of the rebate, by increasing their credit card payments and thereby paying down debt. But soon afterwards spending increased, counter to the canonical Permanent-Income model. For people whose most intensively used credit card account is in the sample, spending on that ...
