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Credit Card Minimum Payment Restrictions

Author

Listed:
  • Jason Allen
  • Michael Boutros
  • Benedict Guttman-Kenney

Abstract

We study a government policy that restricts repayment choices with the aim of reducing credit card debt. The policy requires the minimum payment on credit card balances in Quebec to be at least 2% of the statement balance for cards opened before August 2019 and at least 5% for cards opened after August 2019. The rest of Canada is unaffected. We estimate this policy’s effects by applying a difference-in-differences methodology to comprehensive, Canadian consumer credit-reporting data. The policy causes a persistent increase in minimum payments. The policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency.

Suggested Citation

  • Jason Allen & Michael Boutros & Benedict Guttman-Kenney, 2024. "Credit Card Minimum Payment Restrictions," Staff Working Papers 24-26, Bank of Canada.
    • Handle: RePEc:bca:bocawp:24-26
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit and credit aggregates; Financial system regulation and policies;

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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