Credit Card Minimum Payment Restrictions

Jason Allen, Michael Boutros and Benedict Guttman-Kenney

Staff Working Papers from Bank of Canada

Abstract: We study a government policy that restricts repayment choices with the aim of reducing credit card debt. The policy requires the minimum payment on credit card balances in Quebec to be at least 2% of the statement balance for cards opened before August 2019 and at least 5% for cards opened after August 2019. The rest of Canada is unaffected. We estimate this policy’s effects by applying a difference-in-differences methodology to comprehensive, Canadian consumer credit-reporting data. The policy causes a persistent increase in minimum payments. The policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency.

Keywords: Credit and credit aggregates; Financial system regulation and policies (search for similar items in EconPapers)
JEL-codes: D18 E21 G28 G51 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2024-07
New Economics Papers: this item is included in nep-pay and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:24-26

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