Consumer Demand for Credit Card Services

Daniel Grodzicki, Alexei Alexandrov (), Özlem Bedre-Defolie () and Sergei Koulayev ()
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Özlem Bedre-Defolie: European School of Management and Technology (ESMT) and CEPR
Sergei Koulayev: Amazon

Journal of Financial Services Research, 2023, vol. 63, issue 3, No 2, 273-311

Abstract: Abstract We apply a demand-based approach to study consumer behavior in the credit card market. Using a national database of U.S. card accounts, we find consumers internalize both rates and fees when making purchasing, borrowing, and late payment decisions on their card. Moreover, price effects broadly align with a rational model of card use. An exception is less borrowing in response to declining late-fees among subprime consumers. Extension of the rational model based on “focusing theory” explains this behavior. It also implies substantial indirect benefits of the CARD Act’s late-fee cap from subprime users’ re-focusing toward reducing their debt.

Keywords: Financial decision making; Credit cards (search for similar items in EconPapers)
JEL-codes: D12 D90 G50 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Working Paper: Consumer Demand for Credit Card Services (2017)
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DOI: 10.1007/s10693-022-00381-4

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