Document Type

Working Paper

Publication Date



Chambers College of Business and Economics

Document Number



We use comprehensive U.S. credit bureau data to document stable consumer utilization of credit card debt over the business cycle, life-cycle, and individually quarter to quarter, despite massive variation in available credit. To explain these facts, we propose a model of life-cycle consumption with heterogeneous discounting and credit cards used for payments and consumption smoothing. Using diary data to identify payment use, the estimated model matches consumption and credit use at every frequency and suggests that around half the population has an endogenously high marginal propensity to consume. The results suggest consumer credit availability and heterogeneity of use could be important for counter-cyclical policy.