Minimum payments and debt paydown in consumer credit cards

Benjamin J. Keys, Jialan Wang

Research output: Contribution to journalArticlepeer-review


Using a data set covering one quarter of the U.S. general-purpose credit card market, we document that 29% of accounts regularly make payments at or near the minimum payment. To explain the prevalence of low payment amounts, we exploit changes in issuers’ minimum payment formulas to quantify the explanatory power of two potential theories: liquidity constraints and anchoring. At least 22% of near-minimum payers (and 9% of all accounts) respond to the formula changes in a manner consistent with anchoring as opposed to liquidity constraints alone. Our results show that anchoring to a salient contractual term has a significant impact on household repayment decisions.

Original languageEnglish (US)
Pages (from-to)528-548
Number of pages21
JournalJournal of Financial Economics
Issue number3
StatePublished - Mar 2019


  • Anchoring
  • Consumer finance
  • Credit cards
  • Liquidity constraints
  • Minimum payments

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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