Revolving versus Convenience Use of Credit Cards: Evidence from U.S. Credit Bureau Data

Credit card payments and revolving debt are important for consumer theory but a key data source—credit bureau records—does not distinguish between current charges and revolving debt. We develop a theory-based econometric methodology using a hidden Markov model to estimate the likelihood a consumer is revolving debt each quarter. We validate our approach using a new survey linked to credit bureau data. We estimate that for likely revolvers: (i) 100% of an increase in credit becomes an increase in debt eventually; (ii) credit limit changes are half as salient as debt changes; and (iii) revolving status is persistent.