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Working Paper
Merchant steering of consumer payment choice: evidence from a 2012 Diary survey
This paper seeks to discover whether U.S. merchants are using their recently granted freedom to offer price discounts and other incentives to steer customers to pay with methods that are less costly to merchants. Using evidence of merchant steering based on the 2012 Diary of Consumer Payment Choice, we find that only a very small fraction of transactions received a cash or debit card discount, and even fewer were subjected to a credit card surcharge. Transactions at gasoline stations were more likely to receive either cash discounts or credit card surcharges than transactions in other sectors. Larger-value transactions were somewhat more likely to receive a discount, although the effect is small when controlling for merchant sector. There is little evidence that merchants have started taking advantage of their new flexibility to influence consumers' payment choice by either discounting or surcharging based on the payment method.
AUTHORS: Shy, Oz; Stavins, Joanna
DATE: 2014-05-12

Working Paper
Payment discounts and surcharges: the role of consumer preferences
We use new data from the 2015 Diary of Consumer Payment Choice to analyze price discounts and surcharges based on the payment method used for transactions. We examine consumer preferences for specific payment instruments and test whether consumer demand for payment instruments is price elastic. Specifically, we test whether consumers are likely to deviate from their preferred methods in order to get a discount or to avoid a surcharge. We find that the occurrence of price incentives is low, but consumers who preferred other payment methods had an 11.7 percent probability of switching to cash because of cash discounts, after controlling for merchant category and dollar value of the transaction. Payment method choice is affected very strongly by consumer individual preferences, but steering by merchants may be effective under some circumstances. Both merchants? reluctance to offer price discounts and consumers? limited response to them lead to the low observed occurrences of such incentives.
AUTHORS: Wu, Huijia; Stavins, Joanna
DATE: 2017-02-14

Working Paper
Integrated household surveys: an assessment of U.S. methods and an innovation
We present a vision for improving household financial surveys by integrating responses from questionnaires more completely with financial statements and combining them with payments data from diaries. Integrated household financial accounts?-balance sheet, income statement, and statement of cash flows?-are used to assess the degree of integration in leading U.S. household surveys, focusing on inconsistencies in measures of the change in cash. Diaries of consumer payment choice can improve dynamic integration. Using payments data, we construct a statement of liquidity flows: a detailed analysis of currency, checking accounts, prepaid cards, credit cards, and other payment instruments, consistent with conventional cash-flows measures and the other financial accounts.
AUTHORS: Townsend, Robert M.; Samphantharak, Krislert; Schuh, Scott
DATE: 2017-05-22

Working Paper
Does getting a mortgage affect credit card use?
Buying a house changes a household?s balance sheet by simultaneously reducing liquidity and introducing mortgage payments, which may leave the household more exposed to other shocks. We find that this change affects credit card use in two ways: A debt effect increases credit card spending, while a credit effect leads to higher credit limits. In the short run, a new mortgage acquisition has a robust and statistically significant positive effect on credit card utilization ? the fraction of a consumer?s credit card limit that is used ? of approximately 11 percentage points. Before the 2008 financial crisis, the credit effect exceeded the debt effect in the long run, pushing down long-term utilization. In our sample period after the financial crisis, the debt effect dominated in the long run, and credit card utilization rates rose upon the acquisition of a new mortgage, consistent with larger down payments leaving households more constrained.
AUTHORS: Fulford, Scott L.; Stavins, Joanna
DATE: 2019-05-01

Working Paper
Trends in household portfolio composition
We use data from the Federal Reserve Board?s Survey of Consumer Finances (SCF) to explore how household asset portfolios in the United States evolved between 1989 and 2016. Throughout this period, two key assets ? housing and financial market assets ? drove the household balance sheet evolution; however, we find a great heterogeneity in the balance sheets that averages and aggregates conceal. We observe that ownership of assets has become more concentrated over time, and we show that nearly all of the time series variation in financial vulnerabilities in family balance sheets is due to middle-income families, who hold most of their assets in housing and are often the most highly leveraged income group in the housing market. Tracking the evolution of wealth over time among birth-year cohorts, we observe the standard life-cycle asset accumulation processes among low-, middle-, and high-income families.
AUTHORS: Bricker, Jesse; Moore, Kevin B.; Thompson, Jeffrey P.
DATE: 2019-09-01

Working Paper
Measuring consumer expenditures with payment diaries
As the 2012 Diary of Consumer Payment Choice (DCPC) illustrates, there are advantages to measuring consumer expenditures by tracking the authorization of payments by instrument type (cash, check, debit or credit card, etc.). The main advantages of payment diaries appear to be the following: 1) the ability to measure expenditures by payment instrument aggregated into lumpy purchases (?shopping baskets?), 2) relatively low respondent burden, and 3) effective random sampling. Three notable results emerge from comparing the 2012 DCPC estimates with estimates from other reputable estimates of the current value of consumer expenditures: 1) DCPC payments estimates are 75 percent higher than Consumer Expenditure Survey estimates; 2) DCPC consumption estimates are 17 percent higher than personal consumption expenditures estimates in comparable expenditure categories (about half of the categories are comparable); and 3) DCPC payments roughly equal comparably adjusted national income and product accounts disposable income.
AUTHORS: Schuh, Scott
DATE: 2017-01-20

Working Paper
Nudging credit scores in the field: the effect of text reminders on creditworthiness in the United States
Given the fundamental role that credit scores play in day-to-day life in the United States, it is very important to understand what can be done to help individuals improve their credit scores. This question is important in general, and especially important for the low-to-moderate-income (LMI) individuals who likely have a greater need for access to liquidity than higher-income individuals. In this paper the authors report results from a field experiment conducted between early 2013 and early 2014 in Boston, Massachusetts, with LMI taxpayers who were offered credit advising services. Taxpayers who opted into the advising sessions were randomized as to whether they received extra information on credit scores and the average APR (annual payment rate) on basic credit cards in their area (the "information" condition), and, independently, as to whether or not they received monthly text reminders (the "text" condition). These reminders included the individual's financial goal and credit score range, reminders to pay bills on time and to pay at least the minimum amount, and updated interest rate information on basic credit cards.
AUTHORS: Bracha, Anat; Meier, Stephan
DATE: 2014-11-01

Journal Article
Household Debt and the Great Recession
In the mid-2000s, household private debt reached a new level 1.2 times larger than personal income? before collapsing during the Great Recession. This paper uses microeconomic data to document the main changes in personal debt and explore the behavior of debt across generations over two periods: before and after the Great Recession. Special emphasis is placed on participation rates by category of debt (the extensive margin), volume borrowed (the intensive margin), and default behavior. Key findings include that between 1999 and 2013 the fraction of individuals with only unsecured (e.g., credit card) debt decreased, as did their balances. In addition, most forms of private debt (mortgages, credit card debt, and auto loans) had significant boom-bust cycles, but the effects across generations have been very asymmetric.
AUTHORS: Garriga, Carlos; Noeth, Bryan J.; Schlagenhauf, Don E.
DATE: 2017

Journal Article
The Welfare Cost of Business Cycles with Heterogeneous Trading Technologies
The author investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in equilibrium, while this source of inequality vanishes in an economy without business cycles. Put simply, the heterogeneity in trading technologies amplifies the effect of aggregate output fluctuation on consumption inequality. The welfare cost of business cycles is, therefore, larger in such an economy. In the benchmark economy with a reasonably low risk aversion rate, the business cycle cost is 6.49 percent per- period consumption for an average household when the model is calibrated to match the risk premium.
AUTHORS: Chien, YiLi
DATE: 2015

Journal Article
Asset Holdings of Young Households: Trends and Patterns
The authors use multiple waves of the triennial Survey of Consumer Finances (SCF) from 1989 to 2013 to examine the composition of the asset portfolios of young households whose head of household is between 18 and 41 years of age. The focus is on households? decisions to hold different types of assets, including both financial assets (e.g., bank accounts, stocks, and retirement accounts) and nonfinancial assets (e.g., residential real estate, businesses, and automobiles). The authors describe the patterns of acquisition of broad asset categories in the early part of the life cycle with attention to patterns that appear to have changed over time and explore how the propensity to hold different types of assets varies across households.
AUTHORS: Thomas, Logan; Merry, Ellen A.
DATE: 2014

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