Revolving versus Convenience Use of Credit Cards: Evidence from U.S. Credit Bureau Data

Scott Fulford and Scott Schuh

Journal of Money, Credit and Banking, 2023, vol. 55, issue 7, 1667-1701

Abstract: Credit card payments and revolving debt are important for consumer theory but a key data source—credit bureau records—does not distinguish between current charges and revolving debt. We develop a theory‐based econometric methodology using a hidden Markov model to estimate the likelihood a consumer is revolving debt each quarter. We validate our approach using a new survey linked to credit bureau data. We estimate that for likely revolvers: (i) 100% of an increase in credit becomes an increase in debt eventually; (ii) credit limit changes are half as salient as debt changes; and (iii) revolving status is persistent.

Date: 2023
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https://doi.org/10.1111/jmcb.13023

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:55:y:2023:i:7:p:1667-1701

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