Credit card borrowing, delinquency, and personal bankruptcy
AbstractCredit card delinquencies and personal bankruptcy rates increased during the mid 1990s, despite the strength of the U.S. economy. Even though per capita income rose during that period, household borrowing grew at an even faster pace. The rise in revolving debt-mainly credit card loans-was especially noticeable, and the increase in personal bankruptcy rates was also substantial. This article examines the relationship between consumer credit card borrowing, delinquency rates, and personal bankruptcies. The author looks at developments involving borrowers, the demand side, and lenders, the supply side. ; Credit card loans have been extended to higher-risk consumers over time. Using data collected in the 1998 Survey of Consumer Finances, the author examines the effect of credit card borrowing on consumer payments delinquency and the relationship between credit card debt and the increase in bankruptcy rates. She also tests whether credit card lenders face an adverse selection problem, whereby banks making worse credit card offers attract more risky customers and have higher delinquency and charge-off rates than others. She finds that banks that charge higher interest rates and some fees have higher delinquency rates, but not higher charge-off rates. Moreover, banks that charge higher interest rates were found to have higher net revenues from credit card lending than other issuers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Boston in its journal New England Economic Review.
Volume (Year): (2000)
Issue (Month): Jul ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sandra E. Black & Donald P. Morgan, 1999. "Meet the new borrowers," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 5(Feb).
- Ian Domowitz & Robert L. Sartain, 1999. "Determinants of the Consumer Bankruptcy Decision," Journal of Finance, American Finance Association, vol. 54(1), pages 403-420, 02.
- Glenn B. Canner & Arthur B. Kennickell & Charles A. Luckett, 1995. "Household sector borrowing and the burden of debt," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 323-338.
- David K. Musto, 1999. "The Reaquisition of Credit Following Chapter 7 Personal Bankruptcy," Center for Financial Institutions Working Papers 99-22, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Edward J. Bird & Paul A. Hagstrom & Robert Wild & Janet A. Weiss, 1999. "Credit card debts of the poor: High and rising," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 18(1), pages 125-133.
- Mamie Marcuss, 2004. "A look at household bankruptcies," Communities and Banking, Federal Reserve Bank of Boston, issue Spr, pages 15-20.
- Christian Weller, 2010.
"Have Differences in Credit Access Diminished in an Era of Financial Market Deregulation?,"
Review of Social Economy,
Taylor & Francis Journals, vol. 68(1), pages 1-34.
- Christian E. Weller, 2007. "Have Differences in Credit Access Diminished in an Era of Financial Market Deregulation?," Working Papers wp144, Political Economy Research Institute, University of Massachusetts at Amherst.
- Gross, Tal & Notowidigdo, Matthew J., 2011.
"Health insurance and the consumer bankruptcy decision: Evidence from expansions of Medicaid,"
Journal of Public Economics,
Elsevier, vol. 95(7-8), pages 767-778, August.
- Gross, Tal & Notowidigdo, Matthew J., 2011. "Health insurance and the consumer bankruptcy decision: Evidence from expansions of Medicaid," Journal of Public Economics, Elsevier, vol. 95(7), pages 767-778.
- Irina A. Telyukova, 2013.
"Household Need for Liquidity and the Credit Card Debt Puzzle,"
Review of Economic Studies,
Oxford University Press, vol. 80(3), pages 1148-1177.
- Irina A. Telyukova, 2007. "Household Need for Liquidity and the Credit Card Debt Puzzle," 2007 Meeting Papers 515, Society for Economic Dynamics.
- Telyukova, Irina A., 2007. "Household Need for Liquidity and the Credit Card Debt Puzzle," MPRA Paper 6674, University Library of Munich, Germany.
- Telyukova, Irina A., 2012. "Household Need for Liquidity and the Credit Card Debt Puzzle," University of California at San Diego, Economics Working Paper Series qt0ww2c04z, Department of Economics, UC San Diego.
- Telyukova, Irina, 2008. "Household Need for Liquidity and the Credit Card Debt Puzzle," University of California at San Diego, Economics Working Paper Series qt4c67r71r, Department of Economics, UC San Diego.
- Wang, Lili & Lu, Wei & Malhotra, Naresh K., 2011. "Demographics, attitude, personality and credit card features correlate with credit card debt: A view from China," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 179-193, February.
- Charles Sprenger & Joanna Stavins, 2008. "Credit card debt and payment use," Working Papers 08-2, Federal Reserve Bank of Boston.
- Singh, Shweta & Murthi, B.P.S. & Steffes, Erin, 2013. "Developing a measure of risk adjusted revenue (RAR) in credit cards market: Implications for customer relationship management," European Journal of Operational Research, Elsevier, vol. 224(2), pages 425-434.
- Kartik B. Athreya & Hubert P. Janicki, 2006. "Credit exclusion in quantitative models of bankruptcy: does it matter?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 17-49.
- Kartik Athreya, 2004. "Shame as it ever was : stigma and personal bankruptcy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-19.
- Massoud, Nadia & Saunders, Anthony & Scholnick, Barry, 2011. "The cost of being late? The case of credit card penalty fees," Journal of Financial Stability, Elsevier, vol. 7(2), pages 49-59, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.