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Intra-household Frictions, Anchoring, and the Credit Card Debt Puzzle

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  • Erkki Vihriälä

    (Aalto University School of Business)

Abstract

I study how intra-household frictions and anchoring contribute to the credit card debt puzzle, the co-holding of high-cost debt, and low-yield liquid assets. First, I find couples co-hold 42% more as units than as individuals relative to income. Moreover, in a natural experiment, couples do not cooperate to reduce high-cost debt, suggesting that intra-household frictions contribute to co-holding. Second, I find individuals who regularly make credit card debt payments equal to or near the minimum account for 59% of individual co-holding. The evidence suggests anchoring to the minimum payment contributes to co-holding via these low payments.

Suggested Citation

  • Erkki Vihriälä, 2025. "Intra-household Frictions, Anchoring, and the Credit Card Debt Puzzle," The Review of Economics and Statistics, MIT Press, vol. 107(2), pages 510-522, March.
    • Handle: RePEc:tpr:restat:v:107:y:2025:i:2:p:510-522
    DOI: 10.1162/rest_a_01264
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