NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Sara G. Castellanos

Banco de México

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Institutional Affiliation: Banco de México

NBER Working Papers and Publications

July 2018Expanding Financial Access Via Credit Cards: Evidence from Mexico
with Diego Jiménez Hernández, Aprajit Mahajan, Enrique Seira: w24849
Credit card debt is increasingly common among poor and inexperienced borrowers – thus de facto a financial inclusion product. However, it remains relatively under-studied. We use detailed card level data and a product that accounted for 15% of all first-time formal loans in Mexico and show that default rates are high and ex-ante unpredictable for new borrowers – suggesting an important role for ex-post contract terms in limiting risk. However, using a large nation-wide experiment we find that default is unresponsive to minimum payment increases, a commonly proposed policy remedy. We provide evidence that the zero result is driven by the offsetting effects of tightened liquidity constraints and lower debt burdens. Surprisingly, we also find muted default responses to large experimental cha...
 
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