Credit card borrowing, delinquency, and personal bankruptcy
Credit 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.
Volume (Year): (2000)
Issue (Month): Jul ()
|Contact details of provider:|| Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210|
Web page: http://www.bos.frb.org/
More information through EDIRC
|Order Information:|| Email: |
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).
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:2000:i:jul:p:15-30. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio)
If references are entirely missing, you can add them using this form.