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Finance and Economics Discussion Series
Finance and Economics Discussion Series logo links to FEDS home page Convenience or Necessity? Understanding the Recent Rise in Credit Card Debt
Kathleen W. Johnson

Abstract: Economist disagree whether the recent increase in credit card debt has been detrimental to U.S. households. However, many rely on a measure of revolving credit published by the Federal Reserve, which captures transactions in which a credit card is used because of its advantages over cash or a check. An increase in debt stemming from such convenience use likely would not signal greater financial vulnerabiltiy for households. In this paper, I present evidence that some of the significant increase in both the level of credit card debt and its growth from 1992 to 2001 was due to convenience use.

Keywords: Household debt, credit cards, credit aggregates

Full paper (456 KB PDF)

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Last update: September 28, 2004