Survey_ACLS_2005

Abstract

We use a unique, proprietary panel dataset from a large U.S. bank that issues credit cards nationally. The dataset had been previously created for other purposes internal to the bank, but it contains the information that we need to study the contract choice of interest here. The dataset includes a representative sample of about two hundred thousand credit card accounts open as of December, 1999. It contains a rich set of variables describing the behavior of these accounts month-by-month from August, 1997 through December, 1999, a total of 29 months.6 The bulk of the data consists of the main billing information listed on each account’s monthly statement, including debt and the credit limit. Note that credit cards can be used for both transactions and borrowing purposes. Our debt variable includes only interest-incurring balances that are rolledover, not transactions balances that are paid off. Also available are the accounts’ credit risk scores, which are used by card issuers as summary statistics for the fundamental risk/profitability characteristics of each account. We exclude from the sample accounts that were delinquent, bankrupt, or otherwise frozen, and the few accounts (about 300) that were offered a low teaser rate at any time within the sample period. The treatment of these accounts is determined by factors outside the contract choice at issue here. We also drop employee and student accounts, since they too were treated differently.10 The resulting sample contains over 150,000 accounts.