Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100125
Authors: 
Ponce, Alejandro
Seira, Enrique
Zamarripa, Guillermo
Year of Publication: 
2014
Series/Report no.: 
Working Papers, Banco de México 2014-03
Abstract: 
We study how consumers allocate debt across credit cards they already hold using new data on credit card activity for a representative sample of consumers with two homogeneous cards in Mexico. We find that relative prices are a very weak predictor of the allocation of debt, purchases, and payments. On average, consumers pay 31% above their minimum financing cost. Evidence on cross-card debt elasticities with respect to interest rates and credit limits show no substitution in the price margin. Our findings offer evidence against the cost-minimizing hypothesis and provide support to behavioral explanations.
Subjects: 
credit cards
household finance
consumer behavior
Mexico
JEL: 
D12
D14
D40
G02
G20
G28
Document Type: 
Working Paper
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