The Credit Card Spending Channel of Monetary Policy: Micro Evidence from Account-level Data

Falk Bräuning and Joanna Stavins

No 25-10, Working Papers from Federal Reserve Bank of Boston

Abstract: Monetary policy impacts consumer spending via the effect of interest rate changes on credit card borrowing. Using supervisory account-level spending and balance data, we estimate that a 1 percentage point increase in the interest rate reduces credit card spending by nearly 9 percent and revolving balances by close to 4 percent. Aggregate results are primarily driven by revolving accounts, while we estimate small and statistically insignificant interest-rate elasticity for transaction accounts. Consistent with financial constraints, low-credit-score accounts tend to adjust spending, while high-credit-score accounts adjust balances.

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: 38
Date: 2025-09-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:101889

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DOI: 10.29412/res.wp.2025.10

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