Revolving Balances and Qualitative Perceptions
While we find strong evidence in support of substitution from credit cards to debit cards for individuals who regularly carry revolving balances, the finding provides little insight into the reasons for the substitution. That is, we do not know whether the substitution is carried out because individuals with revolving balances seek to curb their spending (according to the behavioral theory), to avoid financing costs (according to the traditional neoclassical theory), or for some other reason not captured in our data. ( credit card)
The survey asks a series of qualitative questions related to perceptions about individual payments. The literature has supported the view that attribute perceptions are strongly associated with payment behavior (for evidence and discussions see Hirschman 1982; Miyazaki and Fernandez 2001; Mantel 2000; Jonker 2005; Schuh and Stavins 2008). Given that perceptions are important factors in payment behavior, we are interested in the following question: Which payment attributes do consumers with revolving balances perceive as different between debit and credit in a manner that may influence their payment substitution? ( credit card) This question is important, as it may provide support for either the traditional view, the behavioral view, or neither. The results shown in Table 3 indicate that budgeting and control over money may be the key differences in revolvers’ perceptions associated with their substitution from credit to debit. This view is supported by regression results. ( credit card)
In Table 8 we present results from logistic regressions with robust standard errors of the following form: DebitBetterij = β0 + β1RevolvingBalancesi + γxi + i . (4) DebitBetterij is a dummy variable that equals 1 if consumer i approves of debit cards but not credit cards for that specific perception j. RevolvingBalancesi is a binary variable taking the value 1 if an individual regularly carries a credit card balance and 0 otherwise. x is a vector of socio-demographic characteristics and variables for rewards program participation. Extended results of these regressions are displayed in Table 9. 13 Individuals with revolving balances are significantly less likely than convenience users to indicate that debit is better than credit when it comes to ease, acceptability, and refunds. We would expect such differences to increase the use of credit, not decrease it as seen in the data. ( credit card)
Revolvers are significantly more likely to indicate that debit is better than credit in terms of budgeting and control. We argue that these perceptions of superior budgeting and control over money may be the key factors in revolvers’ substitution from credit to debit. Even though revolvers are less likely to perceive debit as easier to use than credit, they use it more frequently because of the importance to them of budgeting and control over money. Given the nature of the data and the fact that the questions are open to individual interpretation, it is difficult to parse behavioral and traditional views from perception responses. Budgeting and control over money could be interpreted traditionally as avoiding finance charges, or behaviorally as imposing self-control. We cannot determine whether these results support the behavioral or traditional view of credit card debt, although the behavioral approach is consistent with our findings. ( credit card)
Importantly, however, we do not find support for there being another reason why having revolving balances is associated with substitution of debit for credit. Although previous research has found that individuals with revolving balances are more likely than convenience users to adopt debit cards, there are critical differences between adoption and use. We find that individuals with revolving credit balances are also more likely to use debit than credit for point-of-sale purchases. We argue that this substitution is associated with a perception on the part of credit card revolvers that debit cards can help them to budget better and have more control over their money. ( credit card)
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which
became law on July 21, 2010, established the Consumer Financial Protection Bureau (“Bureau”
or “CFPB”).1 One year later, pursuant to that Act, authority and responsibility for implementing
and enforcing the Credit Card Accountability Responsibility and Disclosure Act (“CARD Act” or
simply “Act”) were transferred from the Federal Reserve Board (“Board”) to the Bureau.
CARD Act became law on May 22, 2009. Its stated purpose was to “establish fair and
transparent practices related to the extension of credit” in the credit card marketplace.2
Among those responsibilities Congress originally assigned the Board and then transferred to the
Bureau was a mandate to “review, within the limits of its existing resources available for
reporting purposes, [the] consumer credit card market [every two years].”3 In 2012, the Board
and the Bureau agreed that responsibility for the review passed to the Bureau under the terms of
the Dodd-Frank Act. The Bureau has subsequently reported on the market twice since then, first
1 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010).
2 Credit Card Accountability Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24, 123 Stat. 1734. A full
summary of the CARD Act rules implemented by the Board is at pages 11 through 13 of the Bureau’s 2013 Report.
The Bureau subsequently reissued these rules without material changes in December 2011. See 12 C.F.R. part 1026.
The Bureau later revised two CARD Act rules issued by the Board. On November 7, 2012, the Bureau proposed
selected revisions to the ability-to-pay rules, which were intended to address a number of unintended effects of the
prior rule on consumers who did not work outside the home. The final rule implementing this revision became
effective on May 3, 2013, with an associated compliance deadline of November 4, 2013. See Truth in Lending
(Regulation Z), 78 Fed. Reg. 25818 (May 3, 2013). On March 22, 2013, the Bureau finalized another revision to the
CARD Act rules in response to a federal court ruling in 2012 that had granted a preliminary injunction to block a
part of the Board’s 2011 rule from taking effect. 78 Fed. Reg. 18795 (Mar. 28, 2013); see also Press Release,
Consumer Fin. Prot. Bureau, CFPB Finalized Credit CARD Act Rule (Mar. 22, 2013), available at https://www.
15 U.S.C. § 1616(a).
17 CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
in 2013, then again in 2015.4 The present report constitutes the Bureau’s third mandated review
of the consumer credit card market.
This report fulfills Congress’ directive to review the consumer credit card market in two
First, it responds to the general congressional command in section 502 of the CARD Act to
review and report on the “consumer credit card market.” Second, it addresses “within the limits
of [the Bureau’s] existing resources available for reporting purposes” topics explicitly
enumerated by Congress for inclusion in this review, including:5
1. the terms of credit card agreements and the practices of credit card issuers;
2. the effectiveness of disclosure of terms, fees, and other expenses of credit card plans;
3. the adequacy of protections against unfair or deceptive acts or practices relating to credit
card plans; and
4. whether or not, and to what extent, the implementation of this Act and the amendments
made by this Act has affected:
a. the cost and availability of credit, particularly with respect to non-prime borrowers;
b. the use of risk-based pricing; or
4 See Consumer Fin. Prot. Bureau, Card Act Report, (Oct. 1, 2013) (“2013 Report”), available at http://files.
consumerfinance.gov/f/201309_cfpb_card-act-report.pdf; Consumer Fin. Prot. Bureau, The Consumer Credit Card
Market, (Dec. 2015) (“2015 Report”), available at http://files.consumerfinance.gov/f/201512_cfpb_report-theconsumer-credit-card-market.pdf.
15 U.S.C. § 1616(a).
18 CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
c. credit card product innovation.6
The CARD Act also requires the Bureau to “solicit comment from consumers, credit card issuers,
and other interested parties” in connection with its review.7
This year, as in past years, we have
done so through a Request for Information (“RFI”) published in the Federal Register.8 Also in
keeping with past reports’ practice, we do not address or respond to all comments in a single
subsection of the report, instead discussing specific evidence or arguments provided by
commenters throughout the report.
This section reviews several aspects of the Bureau’s general methodology in compiling this
report. Methodological approaches used in specific sections of this report are explained in more
detail in those sections.
1.3.1 Data sources
This report leverages a number of different data sources. It relies predominantly on sources
already held by the Bureau, by other Federal regulators, and by industry stakeholders. All results
reported in this report are drawn from data aggregated from multiple industry participants.9
15 U.S.C. § 1616(a). This report does not address specific safety and soundness issues relating to credit card issuers.
The prudential regulators have the primary responsibility for monitoring the safety and soundness of financial
15 U.S.C. § 1616(b).
8 Request for Information Regarding Consumer Credit Card Market, 82 Fed. Reg. 13313 (Mar. 10, 2017).
No results in this report can be used to identify the outcomes or practices of individual entities. At the same time,
outcomes and patterns we observe in the market as a whole may not be true for (or may only apply in a limited
degree to) any particular industry player.
19 CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
Sources include the following:
1. Data from the Bureau’s Consumer Credit Panel (“CCP”), which is a 1-in-48 longitudinal
sample of de-identified credit records purchased from one of the national credit reporting
agencies, and which is representative of the population of consumers with credit records.
The Bureau has advanced substantially in its ability to leverage these data since 2015. This
advancement is reflected both within this report as well as in other Bureau products, such as
our Consumer Credit Trends reports.10 These data contain no personally identifiable
information, such as name, address, or Social Security number. The Bureau cannot tie any of
the information to any particular individual, and the CCP contains no transaction-level data;
2. De-identified information that the Board collects as part of its “Y-14M” data collection.
The Board collects these data monthly from bank holding companies that have total
consolidated assets exceeding $50 billion.11 The Board shares with the Bureau data from Y14 banks. The data received by the Bureau cover the period from the middle of 2012 through
the present.12 The Y-14 data used by the Bureau currently account for over three-quarters of
the consumer credit card market as measured by outstanding balances.13
Information in the Y-14 data received from the Board cannot be tied to any particular
individual. Additionally, accounts associated with the same consumer are not linked across
issuers. The data do not encompass individual transactions. In addition, the Bureau uses the
10 See Consumer Fin. Prot. Bureau, Consumer Credit Trends, https://www.consumerfinance.gov/data-research/
consumer-credit-trends (last visited Nov. 28, 2017).
11 More information on the Y-14M collection can be found at https://www.federalreserve.gov/apps/reportforms
/reportdetail.aspx?sOoYJ+5BzDYnbIw+U9pka3sMtCMopzoV (last visited Nov. 28, 2017).
12 The Board has expanded the fields it collects from banks over time; therefore, some results reported below do not
extend all the way back to 2012. Additionally, these data are periodically revised, and are therefore not fully static.
13 These issuers represent a large portion of the market, but are not necessarily representative of the portion of the
market not covered by the data the Bureau receives. A substantial number of consumer credit cards, cumulatively
representing the remainder of the market as measured by outstanding balances, are outside the scope of the Y-14
data used by the Bureau because, among other reasons, they are issued by banks with assets of less than $50 billion,
or are issued by non-banks, such as credit unions. Results reported from Y-14 data throughout this report should be
20 CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
data in the present study only to report aggregate metrics, such that none of the reporting
reveals information about any specific issuer.
These data substitute for, rather than complement, previous loan-level credit card data
collections to which the Bureau was a party. The Bureau no longer requires or oversees the
collection of any loan-level credit card data on a standing basis;
3. Information provided in response to a series of data requests made to a number of
industry participants, comprised of four distinct sets:
a. Data requested from a broad and diverse group of issuers in order to address a range
of topics that neither CCP nor Y-14 data can address. These data cover a variety of
subjects, including application volumes and approval rates, credit line increases, digital
account servicing, and debt collection We refer to these data as Mass Market Issuer
b. Data requested from issuers that offer deferred interest products. These data should
not be confused with the deferred interest data we reported on in our previous report.
The data we collected for this report differ in two substantial ways: first, they cover a
broader swathe of the deferred interest market; second, they are only aggregate
performance data, not account-level data. We refer to these data as Aggregate Deferred
Interest (“ADI”) data;
c. Data requested from a group of entities that specialize in offering credit cards to
consumers with subprime credit scores. These data differ from the subprime specialist
issuer data we reported on in our previous report in two important ways. First, rather
than being aggregate “snapshot” performance data, these data cover the outcomes and
experiences (in aggregate) of a “vintage” of accounts over time. Second, they include
responses from both bank issuers and non-bank program managers. We refer to these
data as Subprime Specialist Vintage (“SSV”) data; 14
14 We provide greater detail into the structure and scope of the SSV data below in Section 6.
CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
d. Data obtained from a group of entities that manage websites and mobile applications
(“mobile apps”) that position themselves as empowering consumers to comparison shop
for credit cards. We refer to these websites as “third-party comparison sites” (“TPC
4. The CFPB’s Credit Card Agreement Database, which is an online database available to the
public, was created pursuant to the CARD Act.16 It contains most credit card agreements
available to consumers as of quarter’s end for each quarter from the third quarter of 2011 to
the fourth quarter of 2014, and from the first quarter of 2016 to present.17 After the fourth
quarter of 2014, the Bureau temporarily suspended collection of agreements for one year in
order to reduce burden while the Bureau developed a more streamlined and automated
electronic submission system.18 Submission and publication resumed in the first quarter of
5. Responses to the RFI that was published in the Federal Register in March 2017, which
sought comment on all aspects of the review described in Section 1.2 above, as well as the
following additional topics: deferred interest products, subprime specialist products, thirdparty comparison sites, secured credit cards, online and mobile account servicing, rewards
products, variable interest rates, and debt collection.19 The RFI generated 27 comments.
That total includes 13 letters from trade associations representing credit card issuers and
other market participants, three letters from individual issuers, three letters from other
industry-side market participants, four letters from consumer advocacy groups, and four
letters from individual consumers;
15 We provide greater detail on third-party comparison sites and the structure and scope of the TPC site data below in
16 15 U.S.C. § 1632(d). The public online database is at http://www.consumerfinance.gov/credit-cards/agreements.
17 Credit card issuers are not required to submit any credit card agreements to the Bureau if the card issuer has fewer
than 10,000 open credit card accounts as of the last business day of the calendar quarter. 12 C.F.R. § 1026.58(c)(5).
18 80 Fed. Reg. 21153 (Apr. 17, 2015); 12 C.F.R. § 1026.58(g).
19 82 Fed. Reg. 13313 (Mar. 10, 2017).
22 CONSUMER FINANCIAL PROTECTION BUREAU — CONSUMER CREDIT CARD MARKET REPORT
6. Credit card complaints that consumers have submitted to the Bureau’s Office of
7. Commercially available data sources to which the Bureau subscribes that focus on the
credit card industry, including mail volume monitoring reports, industry analyst reports,
and data services and analytics from industry consultants. As an example, Mintel provides
data on card solicitations and other marketing materials, via a range of channels;
8. Numerous public sources, including but not limited to Securities and Exchange
Commission (“SEC”) filings, analyst reports, studies by other regulators, academic
scholarship, and the trade press; and
9. Other information gathered through Bureau market monitoring activities.