Co-holding behaviour: unlocking the puzzle

ABSTRACT

This article seeks to explain why households decide to simultaneously hold both credit and savings products. Beyond the arguments of ignorance or behavioural biases commonly used in the literature, our analysis demonstrates that co-holders might be rationally seeking lower interest rates on their consumer credit products. Our analysis reveals that additional savings accumulated before credit uptake, even if not used as a down payment for a debt, reduce the interest rate on credit.

KEYWORDS:

• Co-holding
• consumer credit
• household savings
• interest rate
• quantile regression

JEL CLASSIFICATION:

• G51
• D12

Acknowledgement

This paper uses data from the Eurosystem Household Finance and Consumption Survey.

Disclosure statement

No potential conflict of interest was reported by the authors.