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Credit Card Entrepreneurs

Author

Listed:
  • Ufuk Akcigit

    (University of Chicago)

  • Raman S. Chhina

    (University of Chicago)

  • Seyit Cilasun

    (TED University)

  • Javier Miranda

    (Halle Institute for Economic Research, and Friedrich-Schiller University Jena)

  • Nicolas Serrano-Velarde

    (Bocconi University)

Abstract

Utilizing near real-time QuickBooks data from over 1.6 million small businesses and a targeted survey, this paper highlights the critical role credit card financing plays for small business activity. We examine a two year period beginning in January of 2021. A turbulent period during which, credit card usage by small U.S. businesses nearly doubled, interest payments rose by 60%, and delinquencies reached 2.8%. We find, first, monthly credit card payments were up to three times higher than loan payments during this time. Second, we use targeted surveys of these small businesses to establish credit cards as a key financing source in response to firm-level shocks, such as uncertain cash flows and overdue invoices. Third, we establish the importance of credit cards as an important financial transmission mechanism. Following the Federal Reserve’s rate hikes in early 2022, banks cut credit card supply, leading to a 15.75% drop in balances and a 10% decline in revenue growth, as well as a 1.5% decrease in employment growth among U.S. small businesses. These higher rates also rendered interest payments unsustainable for many, contributing to half of the observed increase in delinquencies. Lastly, a simple heterogeneous firm model with a cash-in-hand constraint illustrates the significant macroeconomic impact of credit card financing on small business activity.

Suggested Citation

  • Ufuk Akcigit & Raman S. Chhina & Seyit Cilasun & Javier Miranda & Nicolas Serrano-Velarde, 2025. "Credit Card Entrepreneurs," Jena Economics Research Papers 2025-003, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2025-0003
    as

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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2023/wp_2025_003.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Small Businesses; Entrepreneurship; Credit Cards; Credit; Job Creation; Turnover;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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