IDEAS home Printed from https://ideas.repec.org/p/bca/bocsan/15-3.html

Credit Cards: Disentangling the Dual Use of Borrowing and Spending

Author

Listed:
  • Olga Bilyk
  • Brian Peterson

Abstract

Over the past 15 years, aggregate credit card balances have been increasing, except for a brief spell in the aftermath of the 2007–09 financial crisis. Determining whether the growing balances are due to increased usage of credit cards as a method of payment or whether they reflect increased short-term borrowing is challenging because aggregate balances are snapshots of charges on credit cards before households make their monthly payments. In this note, we exploit household-level survey data to distinguish between the dual use of credit cards for borrowing or paying for purchases.We find that the growth in credit card balances over the past 15 years reflects increased usage of credit cards for payment (i.e., spending) rather than increased short-term borrowing.

Suggested Citation

  • Olga Bilyk & Brian Peterson, 2015. "Credit Cards: Disentangling the Dual Use of Borrowing and Spending," Staff Analytical Notes 15-3, Bank of Canada.
    • Handle: RePEc:bca:bocsan:15-3
    DOI: 10.34989/san-2015-3
    as

    Download full text from publisher

    File URL: https://doi.org/10.34989/san-2015-3
    File Function: Abstract
    Download Restriction: no
    File URL: https://www.oar-rao.bank-banque-canada.ca/record/986/files/san2015-3.pdf
    File Function: Full text
    Download Restriction: no
    File URL: https://libkey.io/10.34989/san-2015-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Allan Crawford & Umar Faruqui, 2011. "What Explains Trends in Household Debt in Canada?," Bank of Canada Review, Bank of Canada, vol. 2011(Winter), pages 3-15.
    2. Christopher Henry & Kim Huynh & Rallye Shen, 2015. "2013 Methods-of-Payment Survey Results," Discussion Papers 15-4, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jason Allen & Kiana Basiri, 2016. "The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit," Staff Working Papers 16-26, Bank of Canada.
    2. Ho, Anson T.Y. & Morin, Lealand & Paarsch, Harry J. & Huynh, Kim P., 2022. "A flexible framework for intervention analysis applied to credit-card usage during the coronavirus pandemic," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1129-1157.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2019. "Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods," Staff Working Papers 19-32, Bank of Canada.
    2. Claire Greene & Oz Shy, 2020. "How Consumers Get Cash: Evidence from a Diary Survey," Consumer Payments Research Data Reports 2019-1, Federal Reserve Bank of Atlanta.
    3. Mr. Ivo Krznar & Mr. James Morsink, 2014. "With Great Power Comes Great Responsibility: Macroprudential Tools at Work in Canada," IMF Working Papers 2014/083, International Monetary Fund.
    4. Joanna Stavins, 2017. "How Do Consumers Make Their Payment Choices?," Consumer Payments Research Data Reports 2017-1, Federal Reserve Bank of Atlanta.
    5. Paravee Maneejuk & Sopanid Teerachai & Atinuch Ratchakit & Woraphon Yamaka, 2021. "Analysis of Difference in Household Debt across Regions of Thailand," Sustainability, MDPI, vol. 13(21), pages 1-24, November.
    6. Anneke Kosse & Zhentong Lu & Gabriel Xerri, 2020. "An Economic Perspective on Payments Migration," Staff Working Papers 20-24, Bank of Canada.
    7. Patience Nkala & Asrat Tsegaye, 2017. "The Relationship between Household Debt and Consumption Spending in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 9(2), pages 243-257.
    8. Shy, Oz, 2021. "Cashless stores and cash users," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 622-638.
    9. Valéry Dongmo Jiongo & Pierre Nguimkeu, 2018. "Bootstrapping Mean Squared Errors of Robust Small-Area Estimators: Application to the Method-of-Payments Data," Staff Working Papers 18-28, Bank of Canada.
    10. Kim Huynh & Gradon Nicholls & Oleksandr Shcherbakov, 2022. "Equilibrium in Two-Sided Markets for Payments: Consumer Awareness and the Welfare Cost of the Interchange Fee," Staff Working Papers 22-15, Bank of Canada.
    11. Chen, Heng & Huynh, Kim P. & Shy, Oz, 2019. "Cash versus card: Payment discontinuities and the burden of holding coins," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 192-201.
    12. Heng Chen & Walter Engert & Marie-Hélène Felt & Kim P. Huynh & Gradon Nicholls & Daneal O'Habib & Julia Zhu, 2021. "Cash and COVID-19: The impact of the second wave in Canada," Discussion Papers 2021-12, Bank of Canada.
    13. Henry, Christopher S. & Huynh, Kim P. & Nicholls, Gradon, 2018. "Bitcoin awareness and usage in Canada," Journal of Digital Banking, Henry Stewart Publications, vol. 2(4), pages 311-337, May.
    14. Kartashova, Katya & Tomlin, Ben, 2017. "House prices, consumption and the role of non-Mortgage debt," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 121-134.
    15. Huynh Kim P. & Molnar Jozsef & Shcherbakov Oleksandr & Yu Qinghui (Jerry), 2024. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Review of Network Economics, De Gruyter, vol. 23(4), pages 199-230.
    16. Geoffrey R. Dunbar, 2019. "Demographics and the demand for currency," Empirical Economics, Springer, vol. 57(4), pages 1375-1409, October.
    17. Fung, Ben & Huynh, Kim P. & Nield, Kerry & Welte, Angelika, 2018. "Merchant acceptance of cash and credit cards at the point of sale," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 12(2), pages 150-165, July.
    18. Geoffrey R. Dunbar & Casey Jones, 2018. "The (Un)Demand for Money in Canada," Staff Working Papers 18-20, Bank of Canada.
    19. Massimo Coletta & Riccardo De Bonis & Stefano Piermattei, 2019. "Household Debt in OECD Countries: The Role of Supply-Side and Demand-Side Factors," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(3), pages 1185-1217, June.

    More about this item

    Keywords

    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocsan:15-3. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.