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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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The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

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