Asset holdings by card payment patterns and demographic groups

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In this section we explore asset holdings of card owners and credit revolvers to
highlight the puzzles of simultaneous accumulation of assets with high-cost credit
card debt. In all survey years, the highest levels of median liquid assets (defined as
amounts held in checking accounts, savings accounts, money market deposit accounts,
and call accounts at brokerages), median financial assets, and median total net worth
are for those households that used their bank-type credit card to make new charges,
but did not have a balance outstanding. This relative ranking holds for all survey years,
and for virtually all demographic subgroups, and in fact has become more pronounced
over time. In 2001 dollars, median financial assets of households in this category in
2001 were $125,000, more than double the financial assets of such households in
1983, and median net worth at nearly $320,000 was about 50 percent higher. This
increase in wealth can be explained in large part by the rise in the equity market over
the 1990s and increased ownership of equities by these households: in 1983, less than
16
half of households in this category were stockholders, but by 2001 that fraction was
75 percent.
The next highest median asset levels are held by those who have a card but did
not use it to make new charges. On average, their median asset holdings are about
one-third to one-half as large as those of active card users without a balance.
Households who have a balance but at least sometimes pay their balance off
have asset levels a bit lower than those of card owners but non-users, indicating that
these households are able to accumulate financial assets. Households that hardly ever
pay the card balance off have notably lower wealth levels, with median wealth
averaging about half as large as for “sometimes” revolvers, and about one-fifth as
large as for those who use cards but do not carry a balance. In all survey years,
households without bank-type credit cards have the lowest amount of assets. The
decline in median net worth of these households between 1983 and 2001 reflects the
previously noted spread of card ownership to households with lower incomes.

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