Determinants of Borrowing Limits on Credit Cards

Dey, Shubhasis; Mumy, Gene E.

doi:10.2139/ssrn.889719

Cited by 15 publications

(11 citation statements)

References 18 publications

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“…Credit card issuers typically raise the credit limit over time for cardholders with good repayment track records. Dey and Mumy (2009) show that cardholders with better credit scores have higher credit limits and lower interest rates on their credit card accounts because they are perceived as less risky. Figure 1 shows the mean and median credit limits by risk score cohort, based on the Equifax data.…”

Section: Payment Behavior and Risk Scorementioning

confidence: 99%

Credit Card Debt and Consumer Payment Choice: What Can We Learn from Credit Bureau Data?

Stavins

2020

J Financ Serv Res

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We estimate a two-stage Heckman selection model of credit card adoption and use with a unique dataset that combines administrative data from the Equifax credit bureau and self-reported data from the Survey of Consumer Payment Choice, a representative survey of US consumers. Even though the survey data from the borrowers vary somewhat from the data provided by the lenders, the results based on the merged data are qualitatively similar to those based exclusively on self-reported surveys. This finding suggests that if administrative data are not available, it might be sufficient to use survey data to estimate consumer behavior. We find that credit card revolvers have lower income and are less educated than other cardholders. Although consumers who carry credit card debt might be liquidity constrained and not have cheaper borrowing alternatives, the high cost of paying off credit card debt could exacerbate existing inequalities in disposable income among consumers.

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Section: Payment Behavior and Risk Scorementioning

confidence: 99%

Credit Card Debt and Consumer Payment Choice: What Can We Learn from Credit Bureau Data?

Stavins

2020

J Financ Serv Res

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“…The effect is large for highly utilized consumers and small but statistically significant for low-utilized consumers. Dey and Mumy (2009) bankruptcy have a negative effect. Interestingly, they find that being self-employed, typically an indicator of highly variable income, positively affects the limit.…”

Section: Literature Surveymentioning

confidence: 99%

“…111-24, 123 Stat. 1734-1766(2009 rate of subsequent line increases. 4 To do so, I select two vintages of credit card accounts: those opened in 2005 or in 2011.…”

Section: Introductionmentioning

confidence: 99%

A Tale of Two Vintages: Credit Limit Management Before and After the CARD Act and Great Recession

Santucci

2015

SSRN Journal

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“…Bar-Gill and Bubb A few studies examined the determinants of credit card limits independently of the Credit CARD Act. Dey and Mumy (2005) used a cross-section household survey to estimate approved credit limits. Gross and Souleles (2002a) used administrative data from credit card issuing banks and found that credit scores, debt levels, and account age affect credit card limits.…”

Section: Federal Reserve's October 2009 "Senior Loan Officer Opinion mentioning

confidence: 99%

The Credit CARD Act of 2009: What Did Banks Do?

Jambulapati

Stavins

2013

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Credit CARD Act of 2009 was intended to prevent practices in the credit card industry that lawmakers viewed as deceptive and abusive. Among other changes, the Act restricted issuers' account closure policies, eliminated certain fees, and made it more difficult for issuers to change terms on credit card plans. Critics of the Act argued that because of the long lag between approval and implementation of the law, issuing banks would be able to take preemptive actions that might disadvantage cardholders before the law could take effect. Using credit bureau data as well as individual data from a survey of U.S. consumers, we test whether banks closed consumers' credit card accounts or otherwise restricted access to credit just before the enactment of the CARD Act. Because the period prior to the enactment of the CARD Act coincided with the financial crisis and recession, causality in this case is particularly difficult to establish. We find evidence that a higher fraction of credit card accounts were closed following the Federal Reserve Board's adoption of its credit card rules. However, we do not find evidence that banks closed credit card accounts or deteriorated terms of credit card plans at a higher rate between the time when the CARD Act was signed and when its provisions became law. Terms of use: Documents in

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Determinants of Borrowing Limits on Credit Cards

Cited by 15 publications

References 18 publications

Credit Card Debt and Consumer Payment Choice: What Can We Learn from Credit Bureau Data?

Credit Card Debt and Consumer Payment Choice: What Can We Learn from Credit Bureau Data?

A Tale of Two Vintages: Credit Limit Management Before and After the CARD Act and Great Recession

The Credit CARD Act of 2009: What Did Banks Do?

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