Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations

Assessing the Cost & Benefits of Credit Card Rewards: A Response to Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations

Credit Card Rewards: a Response to Who Gains and Who Loses

or two decades, economic and legal academics have speculated about the impact of the fees that merchants pay for credit card acceptance. Since all customers pay the same price, the theory goes, everyone pays for the benefits that go only to credit card users. A recent Federal Reserve Bank of Boston (FRBB) policy paper written by economists Scott Schuh, Oz Shy, and Joanna Stavins entitled Who Ga...

Who Gains and Who Loses from Credit Card payments?

Merchant fees and reward programs generate an implicit monetary transfer from “cash” users to credit card users because merchants generally do not set differential prices for card users to recoup the costs of merchant fees. On average, each cash-using household transfers $50 to households that use credit cards, and each credit card using household receives a subsidy of $240 every year. Among ca...

Credit Card Debt and Payment Use

Charles Sprenger and Joanna Stavins Abstract: Approximately half of credit card holders in the United States regularly carry unpaid credit card debt. These so‐called “revolvers” exhibit payment behavior that differs from that of those who repay their entire credit card balance every month. Previous literature has focused on the adoption of debit cards by people who carry credit card balances, ...

Who Makes Credit Card Mistakes?

We document that not all individuals who pay penalty fees on their credit cards (e.g. for not paying the minimum monthly payment, or for exceeding their credit limit) do so because they don’t have enough money. In fact, a sizable proportion of those who incur credit card penalty fees do have enough money in their deposit accounts, and so could have avoided those penalties. In other words these ...