Timing to the Statement: Understanding Fluctuations in Consumer Credit Use

We show that consumers spend 15% more per day on their credit cards in the ten days following the receipt of a credit card statement than in the days prior to the statement. We test several mechanisms for this effect including mental accounting, optimization of the free float, and liquidity constraints. We show the spending response to the credit card statement date across heterogeneous consumer types. Our results support mental accounting theories but not optimization of the free float or liquidity constraint explanations. Placebo tests show spending does not respond to credit card payment dates or randomized statement dates.

Agarwal, Sumit and Bubna, Amit and Lipscomb, Molly, Timing to the Statement: Understanding Fluctuations in Consumer Credit Use (December 10, 2012). Available at SSRN: https://ssrn.com/abstract=2187604 or http://dx.doi.org/10.2139/ssrn.2187604