Essays on credit card banking and fiscal stimulus Guanyu Zhou

Format:

Book

Thesis/Dissertation

Author/Creator:

Zhou, Guanyu, author.

Contributor:

University of Pennsylvania. Finance., degree granting institution.

Language:

English

Subjects (All):

Finance.

0508.

0338.

0770.

Local Subjects:

Finance.

0508.

0338.

0770.

Genre:

Academic theses

Physical Description:

1 online resource (147 pages)

Contained In:

Dissertations Abstracts International 87-12A

Place of Publication:

Ann Arbor : ProQuest Dissertations and Theses, 2026

Language Note:

English

Summary:

This dissertation studies the economics of credit card lending from the perspective of lender profitability. The first chapter examines why credit card interest rates are so high and analyze credit card lending as an asset class. The second chapter studies how fiscal policy impacts credit card lender profitability in a crisis through borrower repayment. Credit card interest rates currently average 18% spread over the short rate. This spread far exceeds that on any other loan or bond, yet nearly half of households are credit card borrowers. The first chapter answers why card interest rates are so high. While charge-off rates average around 6%, they explain only a fraction of cards' spread. Rewards and non-interest expenses are more than offset by interchange and non-interest income. Operating expenses, particularly marketing, are very large, and are used to generate pricing power. Yet after deducting them, card lending still earns a 6.8\\% return on assets, more than four times the banking sector's. We estimate that credit card rates price in a 4.3% default risk premium, similar to high-yield bonds, and card lending earns an alpha of around 1.5% relative to the aggregate bank sector. Given this exposure to systematic default risk, credit card banks were expected to suffer severely during Covid. Instead, banks made record profits. The second chapter shows this was due to fiscal stimulus. Entering Covid, card bank stocks dropped 60% as market anticipated GFC-level defaults. I causally show that checks caused the largest decreases in credit borrowing among the riskiest, high utilization borrowers, consistent with predominantly non-strategic repayment behavior. I quantify the impact with a model of optimal card lending: checks have opposing effects on profitability: lower charge-offs but reduced credit demand. The positive effect dominated during the crisis. I estimate that the $814B in stimulus checks transferred $75B to credit card banks: $44B from reduced average defaults, and $31B from the covariance between borrower paydown and pre-crisis risk. These results show that fiscal support to consumers in a downturn involves a large transfer to credit card lenders

Notes:

Source: Dissertations Abstracts International, Volume: 87-12, Section: A.

Advisors: Drechsler, Itamar Committee members: Gomes, Joao; Salgado, Sergio

Ph.D. University of Pennsylvania 2026

Vendor supplied data

Local Notes:

School code: 0175

ISBN:

9798247973379

Access Restriction:

Restricted for use by site license