An investigation of credit card holding, borrowing, and payoff .

摘要

The widespread use of credit cards has challenged the traditional lifecycle hypothesis and introduced new uncertainties into U.S. financial markets. Based on a set of new survey data, this dissertation empirically investigates two critical issues in the credit card market: (1) the lifecycle borrowing and payoff profiles of credit card revolvers adjusting for cohort effects, (2) the underlying determinants of the consumer's choices regarding holding, borrowing, and payment on credit cards.; Due to data limitations, most previous studies analyzed consumer debt in a static or comparative static context. Using a synthetic cohort approach, this research tracks the changing behavior of credit card borrowing and payoff in a lifecycle framework for different birth cohorts observed in a time series of cross sections. A two-way fixed effect, pseudo-panel data model is proposed to disentangle cohort effects from age and time effects and to estimate the cohort-adjusted profiles. The fitted profiles show very different patterns compared with the unadjusted cross-sectional profiles implied by the simple lifecycle hypothesis. The results suggest that younger American consumers are borrowing more heavily and repaying at lower rates on credit cards than older generations. If the current borrowing and repayment habits persist, a substantial buildup of credit card debt at a later period in life may jeopardize the financial well-being of the elderly and cause instability in the credit card market.; For effective policy-making and regulation in consumer finance, it is necessary to understand the underlying determinants of consumer behavior in credit card holding, borrowing and payoff. This study examines a variety of factors, including credit related variables, socioeconomic variables, and expectations variables, in determining household behavior related to credit card use. Specifically, the analysis focuses on three aspects of the consumer's choices: (1) credit card ownership, i.e. whether or not to hold a credit card, (2) credit card borrowing, i.e. whether or not to borrow on a credit card, and (3) determinants of the levels of credit card debt and payoff rates. Analyzing credit card debt and payoff rates in the context of ownership choice and borrowing choice helps to provide an understanding of how consumers maximize utility by switching between different roles, and allows us to look at consumer behavior in the credit card market from a broader perspective.