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Briefing
The role of interchange fees on debit and credit card transactions in the payments system
Mead, Tim; Haltom, Renee Courtois; Blackwell, Margaretta (2011-05)
When consumers use debit or credit cards to make purchases, merchants are assessed fees for processing the transactions, the largest of which is called an "interchange" fee. Rising interchange fees, along with the growing dominance of card transactions in the payments system, have brought increasing scrutiny from regulators on the appropriate level of interchange fees and the competitive aspects of card networks. A look at the trends, mechanics, and economic role of interchange fees indicates that the issue is more complicated than it may initially appear.
Richmond Fed Economic Brief , Issue May

Journal Article
An overview of changes to credit card regulations and discussion of potential impacts on card users
Berry, Michael (2010-04)
Significant regulatory changes affecting credit card terms and conditions were signed into law in May 2009, and took effect in February 2010. A number of these changes will affect lower-income consumers, ostensibly those with few options to "shop" contracts and features in ways that might not impact mainstream consumers. Most Changes will affect the majority of consumers. This brief essay summarizes the overall changes, and provides some comments on the changes that may affect the subprime and/or lower-income subset of credit card user, as well as those impacted by job loss or business ...
Profitwise , Issue Apr , Pages 11-12

Discussion Paper
Who pays for credit cards?
Emmons, William R.; Chakravorti, Sujit (2001)
We model side payments in a competitive credit-card market. If competitive retailers charge a single (higher) price to cover the cost of accepting cards, banks must subsidize convenience users to prevent them from defecting to merchants who do not accept cards. The side payments will be financed by card users who roll over balances at interest if their subjective discount rates are high enough. Despite the feasibility of cross subsidies among cardholders, price discrimination without side payments is Pareto preferred because of the costliness of the card network--unless banks have other ...
Occasional Paper; Emerging Payments , Paper EPS-2001-1

Journal Article
Solving the mystery of high credit card rates
Pozdena, Randall (1991)
FRBSF Economic Letter

Working Paper
Does getting a mortgage affect credit card use?
Stavins, Joanna; Fulford, Scott L. (2019-05-01)
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 ...
Working Papers , Paper 19-8

Journal Article
The efficiency and integrity of payment card systems: industry views on the risks posed by data breaches
Summers, Bruce J.; Porter, Richard D.; Cheney, Julia S.; Hunt, Robert M.; Jacob, Katy (2012-10)
To examine the adequacy of existing efforts to prevent, manage, and mitigate data breaches and other fraud in card-based payment systems, the authors conducted 17 interviews of various payment industry participants in 2009. This article documents the insights gained from the interviews, which consider the need for greater cooperation, sharing of relevant information, and innovation to stay ahead of the criminals that perpetrate payment card fraud with increasingly sophisticated methods.
Economic Perspectives , Volume 36 , Issue Q IV , Pages 130-146

Discussion Paper
A tale of two vintages: credit limit management before and after the CARD act and Great Recession
Santucci, Lawrence (2015-02-18)
This paper uses tradeline-level credit card data to examine initial credit limits and early credit limit increases before and after the Great Recession and implementation of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (the CARD Act). I compare two vintages of credit card accounts, those opened in 2005 and 2011; I also follow each vintage for more than two years after the account opening. In general, I find that significantly less credit was extended to approved credit card applicants in 2011 than in 2005. Accounts in the 2011 vintage started out with lower ...
Consumer Finance Institute discussion papers , Paper 15-1

Working Paper
Switching costs and adverse selection in the market for credit cards: new evidence
Gordy, Michael B.; Calem, Paul S.; Mester, Loretta J. (2005)
To explain persistence of credit card interest rates at relatively high levels, Calem and Mester (AER, 1995) argued that informational barriers create switching costs for high-balance customers. As evidence, using data from the 1989 Survey of Consumer Finances, they showed that these households were more likely to be rejected when applying for new credit. In this paper, they revisit the question using the 1998 and 2001 SCF. Further, they use new information on card interest rates to test for pricing effects consistent with information-based switching costs. The authors find that informational ...
Working Papers , Paper 05-16

Conference Paper
Workshop overview
Barron, Patrick; Perrit, Henry H.; Vartanian, Thomas P.; Allen, Catherine (1999)
Proceedings , Paper 655

Working Paper
Your house or your credit card, which would you choose?: personal delinquency tradeoffs and precautionary liquidity motives
Cohen-Cole, Ethan; Morse, Jonathan (2009)
This paper finds strong evidence that many individuals choose to pay credit card bills even at the cost of mortgage delinquencies and foreclosures. While the popular press and some recent literature have suggested that this choice may emerge from steep declines in housing prices, we find evidence that individual-level liquidity concerns are at least as important in the decision. That is, choosing credit cards over housing suggests a precautionary liquidity preference. ; By linking the mortgage delinquency decisions to individual-level credit conditions, we are able to assess the compound ...
Supervisory Research and Analysis Working Papers , Paper QAU09-5

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