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Convenience or necessity? understanding the recent rise in credit card debt

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  • Kathleen W. Johnson
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    Abstract

    Economist disagree whether the recent increase in credit card debt has been detrimental to U.S. household. However, many rely on a measure of revolving credit published by the Federal Reserve, which captures transactions in which a credit card is used because of its advantages over cash or a check. An increase in debt stemming from such convenience use likely would not signal greater financial vulnerability for households. In this paper, I present evidence that some of the significant increase in both the level of credit card debt and it growth from 1992 to 2001 was due to convenience use.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2004-47.

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    Date of creation: 2004
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    Handle: RePEc:fip:fedgfe:2004-47

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    Related research

    Keywords: Credit cards ; Debt;

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    1. Christopher D Carroll, 1990. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," Economics Working Paper Archive 371, The Johns Hopkins University,Department of Economics, revised Aug 1996.
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    Cited by:
    1. Marques Benton & Stephan Meier & Charles Sprenger, 2007. "Overborrowing and undersaving: lessons and policy implications from research in behavioral economics," Public and Community Affairs Discussion Papers 2007-4, Federal Reserve Bank of Boston.
    2. Telyukova, Irina A., 2007. "Household Need for Liquidity and the Credit Card Debt Puzzle," MPRA Paper 6674, University Library of Munich, Germany.
    3. Elizabeth Klee, 2006. "Families' use of payment instruments during a decade of change in the U.S. payment system," Finance and Economics Discussion Series 2006-01, Board of Governors of the Federal Reserve System (U.S.).
    4. Andrew Kish, 2006. "Perspectives on recent trends in consumer debt," Payment Cards Center Discussion Paper 06-05, Federal Reserve Bank of Philadelphia.

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