Credit Card Holders, Convenience Users and Revolvers: A Tobit Model with Binary Selection and Ordinal Treatment

Abstract

This paper studies the characteristics of credit card holders in Malaysia and distinguishes between convenience users and revolvers. A Tobit model with binary selection and ordinal treatment is developed to accommodate the data feature that debts are incurred only among card holders and the endogeneity of card holding in card debt. Results from a stratified sample in Malaysia indicate that age, household size, income, education, loan commitments, and current-account ownership play a role in card holding. Age, loan commitments, previous card holdings, current-account ownership, and bad debt history affect the probability and level of card debt. Multi-card holders are more likely to be credit revolvers than convenience users.

JEL classification codes:

• D12
• D14
• E51

Key words:

• credit card
• revolving credit
• sample selection
• treatment effect