Credit Card Debt Puzzles

Michael Haliassos and Michael Reiter

No 233, Working Papers from Barcelona School of Economics

Abstract: Most US credit card holders revolve high-interest debt, often combined with substantial (i) asset accumulation by retirement, and (ii) low-rate liquid assets. Hyperbolic discounting can resolve only the former puzzle (Laibson et al., 2003). Bertaut and Haliassos (2002) proposed an "accountant-shopper" framework for the latter. The current paper builds, solves, and simulates a fully-specified accountant-shopper model, to show that this framework can actually generate both types of co-existence, as well as target credit card utilization rates consistent with Gross and Souleles (2002). The benchmark model is compared to setups without self-control problems, with alternative mechanisms, and with impatient but fully rational shoppers.

Keywords: Credit Cards; debt; self control; household portfolios (search for similar items in EconPapers)
JEL-codes: E21 G11 (search for similar items in EconPapers)
Date: 2015-09
References: Add references at CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Credit card debt puzzles (2005)
Working Paper: Credit card debt puzzles (2005)
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