Intra-household Frictions, Anchoring, and the Credit Card Debt Puzzle

Erkki Vihriälä
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Erkki Vihriälä: Aalto University School of Business

The Review of Economics and Statistics, 2025, vol. 107, issue 2, 510-522

Abstract: I study how intra-household frictions and anchoring contribute to the credit card debt puzzle, the co-holding of high-cost debt, and low-yield liquid assets. First, I find couples co-hold 42% more as units than as individuals relative to income. Moreover, in a natural experiment, couples do not cooperate to reduce high-cost debt, suggesting that intra-household frictions contribute to co-holding. Second, I find individuals who regularly make credit card debt payments equal to or near the minimum account for 59% of individual co-holding. The evidence suggests anchoring to the minimum payment contributes to co-holding via these low payments.

Date: 2025
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