Beryl Chang

Greater Access to Consumer Credit Beryl Chang

The availability of consumer credit has expanded greatly during the past twenty years in OECD countries. While higher income groups long had access to credit, the proliferation of credit cards has gradually increased access to credit for a wide range of household income groups and in virtually all regions of the United States. This paper searches for empirical and econometric evidence on the impact of greater access to consumer credit on savings, investments, and consumptions across five income groups. While findings in this paper show that easier access to credit could have smoothed the consumption of the low income quintile group and facilitated the welfare of the upper- middle to high-income groups in terms of consumption and investments, excessive expansion in revolving credit decreases the savings rate of almost all income groups, is expected to reduce long-term and sustainable growth, and subsequently lowers the overall living standards of most populations in the U. S.