Rate Caps on Revolving Credit Lines

Gajendran Raveendranathan, Georgios Stefanidis and Guillaume Sublet

Journal of Political Economy Macroeconomics, 2026, vol. 4, issue 1, 164 - 210

Abstract: We show that the revolving nature of credit lines—long-term contracts providing ongoing access to short-term debt—matters for regulating credit card interest rates. First, revolving credit lines make credit access history dependent, so cardholders and non-cardholders with identical credit worthiness face different trade-offs. Second, competition for credit offers to cardholders dilutes the profitability of revolving credit lines, which curtails credit access for non-cardholders. In a model calibrated to the US credit card market, optimal rate caps tailored to credit access generate twice the efficiency gains of a uniform cap. Tailoring rate caps beyond credit access yields only small additional gains.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1086/739338 (application/pdf)
http://dx.doi.org/10.1086/739338 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpemac:doi:10.1086/739338

Access Statistics for this article

More articles in Journal of Political Economy Macroeconomics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().