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How do Americans repay their debt?: the balance-matching heuristic

Gathergood, John; Mahoney, Neale; Stewart, Neil; Weber, Jörg

How do Americans repay their debt?: the balance-matching heuristic Thumbnail


Neale Mahoney

Neil Stewart

Jörg Weber


In Gathergood et al. (forthcoming), we studied credit card repayments using linked data on multiple cards from the United Kingdom. We showed that individuals did not allocate payments to the higher interest rate card, which would minimize the cost of borrowing, but instead made repayments according to a balance-matching heuristic under which the share of repayments on each card is matched to the share of balances on each card. In this paper, we examine whether these results extend to the United States using a large sample of TransUnion credit bureau data. These data do not have interest rates, so we cannot examine the optimality of payments. However, we observe balances and repayments, so we can examine balance-matching behavior. We replicate our analysis and find that Americans also repay their debt in accordance with a balance-matching heuristic. * We thank Ruchi Mahadeshwar and Qi Zheng for excellent research assistance. The results in this paper were calculated (or derived) based on credit data provided by TransUnion, a global information solutions company, through a relationship with the


Gathergood, J., Mahoney, N., Stewart, N., & Weber, J. (2019). How do Americans repay their debt?: the balance-matching heuristic. Economics Bulletin, 39(2), 1458-1466

Journal Article Type Article
Acceptance Date Apr 9, 2019
Publication Date Jun 15, 2019
Deposit Date Apr 24, 2019
Publicly Available Date Jun 18, 2019
Print ISSN 1545-2921
Publisher Economics Bulletin
Peer Reviewed Peer Reviewed
Volume 39
Issue 2
Pages 1458-1466
Public URL
Publisher URL


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