Bancarizing with Credit Cards: Experimental Evidence on Interest Rates and Minimum Payments Elasticities for New Clients

Seira Enrique, Sara Castellanos and Jiménez Hernández Diego J

No 2015-11, Working Papers from Banco de México

Abstract: We study the bancarization of marginal borrowers using credit cards and document that this process is difficult: default risk is substantial, returns heterogeneous, and account closings common. We also take advantage of a randomized control trial that varied interest rates and minimum payments in a very wide range. Against our hypothesis, we find that default risk is very insensitive to (randomized) large changes in interest rates and minimum payments. This could imply that regulating these contract terms may not necessarily "protect" consumers against default and that moral hazard in this market is negligible on average.

Keywords: Credit cards; Development finance; Consumer behavior; Mexico (search for similar items in EconPapers)
JEL-codes: D14 D18 D82 G21 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-cta, nep-exp, nep-ias, nep-mon and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bdm:wpaper:2015-11

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