Sustained credit card borrowing

Daniel Grodzicki, Sergei Koulayev

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Using a large panel of credit card accounts, we examine the dynamics of credit card borrowing and repayment in the United States and what these imply for the expected costs of credit card debt to consumers. Our analysis reveals that: (a) credit cards are predominantly used to borrow, (b) card debt is sustained for long periods and balances frequently rise before being repaid, and (c) this debt is potentially more costly than anticipated. Specifically, we document that 82% of outstanding balances are debt and that 70% of this debt accrues to those borrowing continuously for a year or more. The expected annualized cost of an episode of continuous borrowing is 28% of its initial balance, or 13 percentage points. higher than the average annual percentage rate. Moreover, credit scores decline during episodes, further raising the expected cost of borrowing on a card.

Original languageEnglish (US)
Pages (from-to)622-653
Number of pages32
JournalJournal of Consumer Affairs
Issue number2
StatePublished - Jun 1 2021

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance
  • Sociology and Political Science


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