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Liquidity Constraints and Credit Card Delinquency: Evidence from Raising Minimum Payments

  • Philippe d’Astous and Stephen H. Shore


We use credit card data to estimate the impact of increasing minimum payments on delinquency, payments, spending, and write-offs. Our identification strategy exploits an unusual institutional feature: Borrowers can use their account to make purchases with both revolving loans (on which minimum payments increased) and term loans (on which there was no change). Payment increases by delinquent borrowers are insufficient to match increasing minimums, resulting in lower cure rates and an increase in write-offs. Affected borrowers migrate away from these accounts by decreasing charges and increasing payments, consequently lowering the interest earned by the bank.


Corresponding author

* d’Astous,, Department of Finance, HEC Montréal; Shore (corresponding author),, Robinson College of Business, Georgia State University.


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We are grateful to Stephen Brown (the editor), Chris Carroll, Pierre-André Chiaporri, Keith Crocker, Glenn Harrison, Benjamin Keys, Theresa Kuchler (the referee), Maurizio Mazzocco, Kathleen McGarry, Corina Mommaerts, Noah Stoffman, and Tyson Van Alfen for helpful comments. We also thank seminar participants at the 2015 Cornell University Institute for Behavioral and Household Finance Symposium on Household and Behavioral Finance, the 2016 Cleveland Federal Reserve Bank Household Economics and Decision Making Conference, the 2015 Georgia State University Income Risk Workshop, the 2015 Financial Management Association Annual Meetings, and the 2015 Huebner PhD Colloquium in Seattle for their valuable suggestions.



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