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Credit Card Debt and Payment Use

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  • Charles Sprenger
  • Joanna Stavins

Abstract

Approximately half of credit card holders in the United States regularly carry unpaid credit card debt. These so-called 'revolvers' exhibit payment behavior that differs from the behavior of those who repay their entire credit card balance every month. So far there has been no empirical analysis exploring the relationship between revolving behavior and patterns of payment use, such as substitution away from credit cards to other payment methods. Using data from the 2005 Study of Consumer Payment Preferences, we find that credit card revolvers are significantly more likely to use debit and less likely to use credit than convenience users who repay their balances each month. There is no difference between the two groups in their use of check or cash. Revolvers are also more likely to see debit as superior with respect to control over money and budgeting. The findings suggest that revolvers not only adopt, but also use, debit more frequently, as the means to control their spending.

Suggested Citation

  • Charles Sprenger & Joanna Stavins, 2012. "Credit Card Debt and Payment Use," NFI Working Papers 2012-WP-06, Indiana State University, Scott College of Business, Networks Financial Institute.
  • Handle: RePEc:nfi:nfiwps:2012-wp-06
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    References listed on IDEAS

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    Cited by:

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    3. Ulf Von Kalckreuth & Tobias Schmidt & Helmut Stix, 2014. "Using Cash to Monitor Liquidity: Implications for Payments, Currency Demand, and Withdrawal Behavior," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(8), pages 1753-1786, December.
    4. Bruno Karoubi & Régis Chenavaz & Corina Paraschiv, 2016. "Consumers’ perceived risk and hold and use of payment instruments," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1317-1329, March.
    5. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1745-1758, August.
    6. Simon, John & Smith, Kylie & West, Tim, 2010. "Price incentives and consumer payment behaviour," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1759-1772, August.
    7. Anneke Kosse & David-Jan Jansen, 2011. "Choosing how to pay: the influence of home country habits," DNB Working Papers 328, Netherlands Central Bank, Research Department.
    8. Wang, Lili & Lu, Wei & Malhotra, Naresh K., 2011. "Demographics, attitude, personality and credit card features correlate with credit card debt: A view from China," Journal of Economic Psychology, Elsevier, vol. 32(1), pages 179-193, February.

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