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Borrowing on the Wrong Credit Card: Evidence from Mexico

Alejandro Ponce, Enrique Seira and Zamarripa Guillermo

No 2014-03, Working Papers from Banco de México

Abstract: We study how consumers allocate debt across credit cards they already hold using new data on credit card activity for a representative sample of consumers with two homogeneous cards in Mexico. We find that relative prices are a very weak predictor of the allocation of debt, purchases, and payments. On average, consumers pay 31% above their minimum financing cost. Evidence on cross-card debt elasticities with respect to interest rates and credit limits show no substitution in the price margin. Our findings offer evidence against the cost-minimizing hypothesis and provide support to behavioral explanations.

JEL-codes: D12 D14 D40 G20 G28 G4 (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-ban and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Borrowing on the Wrong Credit Card? Evidence from Mexico (2017) Downloads
Working Paper: Borrowing on the Wrong Credit Card:Evidence from Mexico (2014) Downloads
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