How Interest Rate Changes Affect Credit Card Spending

Falk Bräuning and Joanna Stavins

No 26-2, Current Policy Perspectives from Federal Reserve Bank of Boston

Abstract: The response of credit card spending to interest rate changes has significant implications for how monetary policy affects consumer spending and therefore the broader economy because credit cards have become a dominant payment method in the United States. However, the aggregate effect masks important differences across types of cardholders. As the authors show, the impact of interest rate changes on individual consumers depends critically on whether they carry a balance on their card, and it depends on their credit score, indicating that different segments of the population respond differently to monetary policy.

Keywords: credit cards; interest rates; consumer spending (search for similar items in EconPapers)
JEL-codes: D12 D14 E43 G21 (search for similar items in EconPapers)
Pages: 6
Date: 2026-03-25
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