Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70591
Authors: 
Agarwal, Sumit
Chakravorti, Sujit
Lunn, Anna
Year of Publication: 
2010
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2010-19
Abstract: 
Using a unique administrative level dataset from a large and diverse U.S. financial institution, we test the impact of rewards on credit card spending and debt. Specifically, we study the impact of cash-back rewards on individuals before and during their enrollment in the program. We find that with an average cash-back reward of $25, spending and debt increases by $79 and $191 a month, respectively during the first quarter. Furthermore, we find that cardholders who do not use their card prior to the cash-back program increase their spending and debt more than cardholders with debt prior to the cash-back program. In addition, we find that 11 percent of cardholders that did not use their cards in the previous 3 months prior to the cash-back program spent at least $50 in the first month of the program. Finally, we find heterogeneous responses by demographic and credit constraint characteristics.
Subjects: 
Household Finance
Credit Cards
Consumption
Financial Incentives
Rewards
JEL: 
D1
D8
G2
Document Type: 
Working Paper

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