Working Paper

The Credit Card Spending Channel of Monetary Policy: Micro Evidence from Account-level Data

Abstract: Monetary policy impacts consumer spending via the effect of interest rate changes on credit card borrowing. Using supervisory account-level spending and balance data, we estimate that a 1 percentage point increase in the interest rate reduces credit card spending by nearly 9 percent and revolving balances by close to 4 percent. Aggregate results are primarily driven by revolving accounts, while we estimate small and statistically insignificant interest-rate elasticity for transaction accounts. Consistent with financial constraints, low-credit-score accounts tend to adjust spending, while high-credit-score accounts adjust balances.

JEL Classification: D12; D14; E43; G21;

https://doi.org/10.29412/res.wp.2025.10

Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Working Papers

Publication Date: 2025-09-01

Number: 25-10