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

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Author Info
Kathleen W. Johnson
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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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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This paper has been announced in the following NEP Reports: References listed on IDEAS
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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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  1. Andrew Kish, 2006. "Perspectives on recent trends in consumer debt," Payment Cards Center Discussion Paper 06-05, Federal Reserve Bank of Philadelphia. [Downloadable!]
  2. 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.). [Downloadable!]
  3. 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. [Downloadable!]
  4. Telyukova, Irina A., 2009. "Household Need for Liquidity and the Credit Card Debt Puzzle," MPRA Paper 6674, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-11-18.

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