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Revolving versus Convenience Use of Credit Cards: Evidence from U.S. Credit Bureau Data

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  • SCOTT L. FULFORD
  • SCOTT SCHUH

Abstract

Credit card payments and revolving debt are important for consumer theory but a key data source—credit bureau records—does not distinguish between current charges and revolving debt. We develop a theory‐based econometric methodology using a hidden Markov model to estimate the likelihood a consumer is revolving debt each quarter. We validate our approach using a new survey linked to credit bureau data. We estimate that for likely revolvers: (i) 100% of an increase in credit becomes an increase in debt eventually; (ii) credit limit changes are half as salient as debt changes; and (iii) revolving status is persistent.

Suggested Citation

  • Scott L. Fulford & Scott Schuh, 2023. "Revolving versus Convenience Use of Credit Cards: Evidence from U.S. Credit Bureau Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(7), pages 1667-1701, October.
    • Handle: RePEc:wly:jmoncb:v:55:y:2023:i:7:p:1667-1701
    DOI: 10.1111/jmcb.13023
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