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By Irina A. Telyukova

In the United States, around 25% of households tend have a substantial amount of expensive credit card debt that they carry over multiple months or even years, while also holding significant liquid assets, i.e. balances in checking and savings accounts.

For example, in 2001 data, such households paid an average 14% interest rate on the credit card, while earning nearly no return on the bank accounts. A median such household had $3800 in credit card debt, and $3000 in the bank.  The average amounts were about $5800 and $7200, respectively.  This behavior is quite persistent with age, as the picture below shows. It is also persistent over time, at least over the last two decades. The statistics for 2010 are very close to those for 2001.

It may seem that given the cost of revolving credit card debt, people should pay it off if they have any money in the bank. Hence, the phenomenon has been termed the “credit card debt puzzle”. Much of the discussion of it in the literature interpreted it as evidence that people lack self-control, or that they lack the financial sophistication to plan properly. In my study, I instead focused on a more familiar idea: that people hold on to money in the bank because they may need it for expenses for which credit cannot be used, and such expenses could be large and unexpected.  Not only do we pay our rents and mortgages still largely by check or electronic payment from the bank, but if we have a large car or home repair to take care of, the contractor might give preferential pricing to a cash payment or simply not accept credit cards. Indeed I find that homeowners are more likely to simultaneously have debt and money in the bank, and that home repairs are an important source of large and unpredictable expenses for most households. Then, even if a household has credit card debt, it may not be optimal to draw down the bank account to zero to repay the debt.  Incidentally, this idea has been advanced in the past by those who have studied the same behavior on the side of firms.

The story is intuitive; the difficult part is measuring how well this explanation can account for the puzzle, because we do not have good data on how people pay for things during a typical month, and because it is difficult to disentangle which expenses are unpredictable. Nevertheless, using several household surveys and a model of household portfolio choice, I measured both typical monthly liquid expenses (i.e. those done by cash, check, debit and other ways that require the bank account to have a positive balance), and the extent of uncertainty in them. I find that for the median person, there appears to be enough uncertainty to warrant holding on the order of $3,000 of liquid assets, even if she has credit card debt as well. In other words, many people who simultaneously have credit card debt and money in the bank are behaving without violation of self-control or rationality, under the constraint that they do not have enough money both to pay off their debt and attend to their expected monthly expense needs.

While the story accounts for the median amount of money held in the bank by those who also have credit card debt, the average household has a lot more money in the bank, and more money than credit card debt. This means that there are people who have very large amounts of liquid assets while still revolving credit card debt. While such households may face more severe risks than the average case that I measured, and while some may hold money in the bank because they foresee a possibility of a job loss and want to be able to pay at least their average expenses, it does suggest that some people may be able to improve their financial positions by examining their bank and credit card balances, and the interest costs that they pay on the credit card debt, to see if they can pay off some of their debt using their money in the bank.

Irina A. Telyukova is an assistant professor of economics at the University of California, San Diego. Her research focuses on different aspects of household saving. She has several publications on credit card debt and money demand. Her current research is about the use of home equity in retirement, in the United States and across countries, including a study about reverse mortgages. She is the author of the paper ‘Household Need for Liquidity and the Credit Card Debt Puzzle’, which appears in The Review of Economic Studies.

The Review of Economic Studies aims to encourage research in theoretical and applied economics, especially by young economists. It is widely recognised as one of the core top-five economics journal, with a reputation for publishing path-breaking papers, and is essential reading for economists.

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Image Credits: (1) Graph produced by the author. Do not reproduce without permission. (2) Credit Card. By Gökhan ARICI, iStockphoto

The post Why don’t people pay off credit card debt? appeared first on OUPblog.

A reworking of an image/card from two years ago. This one is on my December promo postcard. Sure is a lot of fun to change this up from time to time and add new angels and animals, etc. My personal favorites are the dog-angel, cat-angel and mouse-angel!

This is the final iteration of a piece I did for Illustration Friday a few weeks back, using the word-prompt “tree”. It went from a boy and dog in a tree, kids in a tree, SNOWmen in a tree, and now back to the first idea. And when I thought THAT was done, I added the boxes, bulbs, and ribbons. I think it’s finished. I have not had the urge to fix or change anything. A good sign! And now I’m using it for one of my Christmas cards this year. Merry Christmas!

Folds flat to mail.
As the viewer opens the card, the workbench pops-up.

Just part of something I’ve been working on…

Just a real quick little pink bear-guy to remember the day.

Posting some cartoons (that I’ve always liked) from a Halloween greeting card I did a few years back…

Here are two pieces that are already on the website, but represent a bit of a jump for me, creatively.

I'm recognizing that I work best when I give myself a few constraints. For my Alumni Sale paintings, I think, "What's a weird animal, and a fitting or fittingly unfitting thing they could do?" (Okay, sometimes it only makes sense to me, but it's a usefuly questions.) I was entirely thwarted by the advice to make a book dummy from a classic fairy tale (everyone will tell you to do that) but the idea of doing a nursery rhyme was really freeing. (More on that soon, I promise.)

Lately, my default parameter is "Why not make this an alphabet?" This isn't always an ideal approach, not just because I don't always want to do 26 of something. Plus, how many words start with X, really?*



I've managed two of these, anyway, the first being "A Bichon frise teaches Ballet to a Beaver, a Bunny, and a Baracuda."

I am ridiculously happy with this piece. I intentionally limited the palette (cerulean is the only blue) and I'm really happy with the vignette edges, among other things. This and the next piece are both on Fabriano watercolor paper, and I think I prefer it to my regular Arches.



"Peccaries Parade in Pompadours and Ponchos, Packing a Pineapple Pinata, Piggy bank, and the Parade Princess."

I'm less utterly charmed by this piece (not: cerulean blue isn't actually the answer to everything) but it was fun. I think the format, which is wildly inappropriate for my website, might mean that this works well as a repeat. We'll see.


Finally, an all new painting. I made this card for an entirely lovely wedding a couple weeks ago. I was really happy I had time to make this (and go to the wedding!), and when two separate speeches mentioned the couple's affinity for wacky cards, I was pretty relieved.



Inside, the card says, "You're going to build an incredible life together." Get it?

*By the way, I hate workarounds, especially in alphabets but also generally. When I was little I had a video that showed an alphabet of animal clips. When they got to X, why just showed an ox, and flipped the word horizontally. Even at age 5, I felt like that was a cop out.

This post marks the third birthday of my blog. Weirdly, this is also post 333, does that make it 50% evil?!

A good pal said to me over the seasonal break that he would like to see my take on The Dude, from the Coen Bros. fabulous The Big Lebowski.
I've got a real soft spot for The Dude, His Dudeness or El Duderino (if you're not into the whole brevity thing).

Like the film itself, there was a nice syncronicity to events, my friend's birthday is tomorrow, my blog would be 3 today, it was a nice quick sketch that I knew he was after and that suited my current status of waiting for feedback on the project I'm working on. Nothing was f**cked, So I drew him a card!


I don't think I've quite captured what I was after, but Jeff Bridges is a tricky chap to depict, even trying to get an essence of The Dude is a tall order... the desire to include (clever) quote related 'in jokes' was definitely not satisfied and originally I intended to do a group shot including Walter and Donny too, but sometimes you eat the bar and sometimes... well, he eats you!

1. Go for a run. 

2. Rent a movie.

3. Build a card tower.

4. Write stuff down backwards and then read it in a mirror.

5. Buy a trampoline.  

6. Jump on it.

7. Crank up some tunes.

8. Try to lick your elbow.

9. Read a good book.

10. Clean up your room.

11. Start a blog.

12. Watch people’s fails on YouTube,

13. Prank call a friend.

14. Find a wall and see how high you can get your hand by jumping.

15. Wet your hair and style it.

16. Start a new instrument.

17. Find a job.

18. Put iodine on any open cuts.  Being bored will seem pretty good after this.

19. Go for a walk and comment on people to your self.

20. Learn how to cook something tasty.

21. Write a story.

22. Take a hot shower.

23. See how far you can get a paper airplane to fly.

24. Wikipedia Race (google it).

25.  Think of something else to do when bored and comment it for others to read.

1. Go for a run. 

2. Rent a movie.

3. Build a card tower.

4. Write stuff down backwards and then read it in a mirror.

5. Buy a trampoline.  

6. Jump on it.

7. Crank up some tunes.

8. Try to lick your elbow.

9. Read a good book.

10. Clean up your room.

11. Start a blog.

12. Watch people’s fails on YouTube,

13. Prank call a friend.

14. Find a wall and see how high you can get your hand by jumping.

15. Wet your hair and style it.

16. Start a new instrument.

17. Find a job.

18. Put iodine on any open cuts.  Being bored will seem pretty good after this.

19. Go for a walk and comment on people to your self.

20. Learn how to cook something tasty.

21. Write a story.

22. Take a hot shower.

23. See how far you can get a paper airplane to fly.

24. Wikipedia Race (google it).

25.  Think of something else to do when bored and comment it for others to read.

I'm still trying to figure out what--and if--I'm sending out a seasonal card for the holidays. So far the only thing I've worked up is the image you see above, which is a reworking of a card I did last year. I'm running out of time, though, so I have to make some decisions real soon. Any thoughts...?

Elvin Lim is Assistant Professor of Government at Wesleyan University and author of The Anti-intellectual Presidency, which draws on interviews with more than 40 presidential speechwriters to investigate this relentless qualitative decline, over the course of 200 years, in our presidents’ ability to communicate with the public. He also blogs at www.elvinlim.com.  In the article below he reflects on the role of race in our upcoming Presidential elections.  See his previous OUPblogs here.

And so it begins. Of course race was going to become an issue this year. It was never possible that the first competitive African-American candidate for president, Barack Obama, would face no obstacle in terms of his racial eligibility for the Oval Office. The only question is how race would rear its ugly and inevitable head.

Already a pattern has emerged. The minority candidate is always accused of playing the minority card. Senator John McCain was quick to throw this accusation last Thursday. This was a response to Obama’s

claim the day before in Missouri in which he charged the Republicans for trying to scare voters by questioning his patriotism and “funny name” and by pointing out he doesn’t “look like those other presidents on those dollar bills.” The question of who really was playing the race card can only be answered in the eyes of the beholder. But let it be said that allusions to Obama’s otherness have been made on both sides from earlier on in the campaign. In naming the “race card” at this particular moment in the campaign and not earlier, the McCain campaign is not just retaliating or reacting to Obama’s actions or words, it is strategizing.

Remember when the Obama camp was accusing Hillary Clinton of playing the gender card? In some degree, Obama is getting the first taste of the medicine Hillary Clinton had to swallow during the primaries. Accuse a minority of playing a minority card, and s/he is dealt a double blow: supporting members of the majority are reminded of the candidate’s minority status and his/her electability problem; at the same time, opposing members of the majority have their stereotype of a whining minority candidate reinforced. When Hillary Clinton was accused of playing the gender card, some of her supporters were reminded that there are some sexists out there who would never vote for her (the “polarizing,” “unelectable” narrative about the Clinton campaign) no matter what, and so cast their votes in favor of Obama. At the same time, those who were already against her strengthened their view that she was a whining, sore loser.

Obama suffers an analogously double hit with the charge that he has played the race card. Independent general election voters are reminded that race is still a salient factor in American politics and some of these voters may see no value in throwing away their vote for an unelectable, polarizing candidate. At the same time, those opposed to Obama are vindicated in their belief that he is an angry race-baiter.

The dominant strategy for a majority candidate, then, is always to accuse a minority candidate of playing a minority (gender or racial) card. Whether or not the card is actually being played, it always benefits the majority candidate to say that it is. Remind enough people that that a minority is a minority, and the faithful lose heart, while the bigots (those who would reject a candidate purely on the basis of his/her minority status) gain ground.

For a majority candidate to not acknowledge his privilege and to deploy a strategy that is asymmetrically available only to him is to engage in the lowest kind of politics. Race is already going to be an explosive issue this year without politicians stoking it. A gentleman acknowledges an underserved advantage when he possesses one. I urge the McCain campaign to take on Obama’s campaign on higher ground.

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Stuart Vyse is Professor of Psychology at Connecticut College, in New London. In his new book, Going Broke: Why Americans Can’t Hold On To Their Money, he offers a unique psychological perspective on the financial behavior of the many Americans today who find they cannot make ends meet, illuminating the causes of our wildly self-destructive spending habits. In the article below he looks at how credit cards lead to debt problems. Read Vyse’s other posts here.

Suddenly cash isn’t quick enough for our fast-paced world. If you want to be happy and efficient and avoid the critical stares of cashiers and fellow customers, you need to swipe or tap a card and keep the line moving. According to the latest round of credit card commercials, checks and cash are just so 20th Century. (more…)

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If you are interested in my other work--flower essences, psychic stuff, fairy stuff--this is a little note that my February Dogbunny Gazette is now up on that site. Click here to see.

Mondays are when I showcase my book in progress, The Fairy Field Guide. It seemed fitting that I excerpted this page since my little grasshopper friend, Susan, crossed over today. I placed her on the big potted tree in our room yesterday. I wanted her to feel the sun--she didn't look very good. I heard her say "I am so high!" with delight (remember, animal communicator here). We talked a very long time before she passed.

I amazed she lived this long! She had only one hopping leg. I almost fell over when I found out online that grasshoppers live only 50 days. (We've had Susan living on our plant since at least March. :) Lots of love to my little friend.

THE ZOO: I met this great Owl at the Zoo this weekend. He blended into the trees surrounding him so nicely that I hardly noticed him. I tried to connect with him but he was of few words. Quite simply, I was interrupting his sleep. I was told I have OWL MEDICINE like my Mom before me (that intuitive gift), so I couldn't wait to meet this creature! I whipped out my pen and did a quicky sketch.

I find it hard to capture animals in movement. Once I start and I get a great pose, the animal moves! I don't know how others master it. Probably reference photos. I lucked out with the owl...he just sat there.

We are slowly becoming zoo junkies. I'd love to talk to each animal and write his story, but I know from my visit to the vet and the groomer's to drop off cards --the vet tech said, "Do you have certification from the state to be animal communicator? (huh?) and the groomer said, "I guess it helps in some situations,"--that the zoo folk may not be responsive to what I do. Tough crowd. This is one gift that can be hard to have. You don't go to a dentist and say, "I don't believe you. What you do is nonsense". Ah, but I digress.

This one took a pretty long time, but it's finally finished:


My intent was to use this as a promo/Christmas card this year, but I kind of hate to sit on it that long and am wondering if I could find a home for it with a greeting card publisher. I've never had much luck getting attention from card publishers in the past, but I suppose it couldn't hurt to try again.

I started this one with a monochromatic watercolor under-painting, since that method seemed to work out pretty well on "The Tea Merchant." I'm still undecided if I'm going to incorporate this method into all of my work. It does add a chunk of time to the process, but not as much as I would have thought.

Changing the subject completely, we went hiking this weekend. Actually we go hiking on most weekends when work/time/weather permits. This weekend, we hit the Getty View Trail which is more or less across from the Getty museum. It was a big surprise to us that this trail even existed in this location since it's literally right next to the 405. My husband used to drive this highway to work every day for four years and never had any inkling that there was parkland right here.

This was probably one of the more harrowing trails we've hiked as the path was very narrow and parts of it appeared to have started to slide down the hill. It was a mile-long series of switchbacks up the side of a low mountain. The reward at the top of the trail was a pleasantly wide fire road that runs along the spine of a couple mountains and grants stunning views of the landscape below.

It was kind of hazy, so the view was probably not quite as nice as it would have been on a clear day, but it was still majestic nonetheless. Needless to say, at the end of the day we were exhausted!