taxes housing and capital accumulation in a two sector growing economy abstract it is sometimes argued that the favorable tax treatment afforded to housing may lead to an oversupply of housing at the expense of capital this issue is examined in the context of a growing two sector economy in the basic model where the rate of time preference is constant and labor is instantaneously sectorally mobile the long run response of the capital stock to a tax on housing depends upon the relative capital intensities of the two sectors while the long run relative asset price of housing remains unchanged the robustness of these propositions to changes in the model are considered taxes on capital are also analyzed

production externalities and investment caps a welfare analysis under uncertainty abstract in markets where production has adverse externalities policy makers may wish to increase welfare by imposing a cap on the aggregate industry output in this paper we examine the implications that the cap has on the firms investment equilibrium policy and on social welfare in the presence of market uncertainty in contrast with previous literature we explicitly model the present externality and then let the social planner choose the cap level maximizing welfare we find that i if the consideration of market uncertainty triggers investment at price above the social marginal cost of production then it is optimal to have no cap at all ii otherwise the cap should be set at the current aggregate industry output and a ban on further market entries should be announced

unshrouding evidence from bank overdrafts in turkey lower prices produce higher demand or do they a bank s direct marketing to holders of free checking accounts shows that a large discount on 60 apr overdrafts reduces overdraft usage especially when bundled with a discount on debit card or auto debit transactions in contrast messages mentioning overdraft availability without mentioning price increase usage neither change persists long after the messages stop these results do not square easily with classical models of consumer choice and firm competition instead they support behavioral models where consumers underestimate and are inattentive to overdraft costs and firms respond by shrouding overdraft prices in equilibrium this article is protected by copyright all rights reserved

how do individuals repay their debt the balance matching heuristic we study how individuals repay their debt using linked data on multiple credit cards repayments are not allocated to the higher interest rate card which would minimize the cost of borrowing moreover the degree of misallocation is invariant to the economic stakes which is inconsistent with optimization frictions instead we show that repayments are consistent with a balance matching heuristic under which the share of repayments on each card is matched to the share of balances on each card balance matching captures more than half of the predictable variation in repayments and is highly persistent within individuals over time

an overview of developments in the irish economy over the last ten years at the time of the first lehigh university conference on the irish economy in 2001 irish real gdp was still growing at an annual rate of almost 6 per cent following a decade where growth had averaged over 7 per cent the celtic tiger economy was showing signs of ageing notably with inflation eroding competitiveness and with it ireland s attractiveness as a destination for fdi but there was little sense of the bubble economy that would fundamentally alter irish economic fortunes over the following decade the succeeding property driven economy did sustain high growth for another half decade or so if not at the spectacular rates of the preceding half decade but it also sowed the seeds for the financial and economic crisis that has so rocked the economy over the last three years this paper sets the scene for the papers in the symposium with a review of the property boom bubble and eventual bust it also reviews the prospects for crisis resolution and export driven recovery

getting to the top of mind how reminders increase saving we provide evidence from field experiments with three different banks that reminder messages increase commitment attainment for clients who recently opened commitment savings accounts messages that mention both savings goals and financial incentives are particularly effective whereas other content variations such as gain versus loss framing do not have significantly different effects nor do we find evidence that receiving additional late reminders has an additive effect these empirical results do not map neatly into existing models so we provide a simple model where limited attention to exceptional expenses can generate undersaving that is in turn mitigated by reminders data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2296 this paper was accepted by teck hua ho behavioral economics

payday loans and credit cards new liquidity and credit scoring puzzles using a unique dataset matched at the individual level from two administrative sources we examine household choices between liabilities and assess the informational content of prime and subprime credit scores in the consumer credit market first more specifically we assess consumers effectiveness at prioritizing use of their lowest cost credit option we find that most borrowers from one payday lender who also have a credit card from a major credit card issuer have substantial credit card liquidity on the days they take out their payday loans this is costly because payday loans have annualized interest rates of at least several hundred percent though perhaps partly explained by the fact that borrowers have experienced substantial declines in credit card liquidity in the year leading up to the payday loan second we show that fico scores and teletrack scores have independent information and are specialized for the types of lending where they are used teletrack scores have eight times the predictive power for payday loan default as fico scores we also show that prime lenders should value information about their borrowers subprime activity taking out a payday loan predicts nearly a doubling in the probability of serious credit card delinquency over the next year this abstract was borrowed from another version of this item

regulating consumer financial products evidence from credit cards we analyze the effectiveness of consumer financial regulation by considering the 2009 credit card accountability responsibility and disclosure card act we use a panel data set covering 160 million credit card accounts and a difference in differences research design that compares changes in outcomes over time for consumer credit cards which were subject to the regulations to changes for small business credit cards which the law did not cover we estimate that regulatory limits on credit card fees reduced overall borrowing costs by an annualized 1 6 of average daily balances with a decline of more than 5 3 for consumers with fico scores below 660 we find no evidence of an offsetting increase in interest charges or a reduction in the volume of credit taken together we estimate that the card act saved consumers 11 9 billion a year we also analyze a nudge that disclosed the interest savings from paying off balances in 36 months rather than making minimum payments we detect a small increase in the share of accounts making the 36 month payment value but no evidence of a change in overall payments jel codes d0 d14 g0 g02 g21 g28 l0 l13 l15

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

heterogeneous expectations boom bust housing cycles and supply conditions a nonlinear economic dynamics approach abstract we combine a standard stock flow housing market model incorporating explicit relationships between house prices the housing stock and the rent level with a parsimonious expectation formation scheme of housing market investors reflecting an evolving mix of extrapolative and regressive expectation rules the model results in a two dimensional discrete time nonlinear dynamical system based on realistic parameters the model is able to generate endogenous boom bust housing market dynamics with lasting periods of overvaluation and overbuilding we thus exploit our model to investigate how real forces in particular supply conditions interact with expectations driven housing market fluctuations

paying not to go to the gym how do consumers choose from a menu of contracts we analyze a novel dataset from three u s health clubs with information on both the contractual choice and the day to day attendance decisions of 7 752 members over three years the observed consumer behavior is difficult to reconcile with standard preferences and beliefs first members who choose a contract with a flat monthly fee of over 70 attend on average 4 3 times per month they pay a price per expected visit of more than 17 even though they could pay 10 per visit using a 10 visit pass on average these users forgo savings of 600 during their membership second consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year this is surprising because monthly members pay higher fees for the option to cancel each month we also document cancellation delays and attendance expectations among other findings leading explanations for our findings are overconfidence about future self control or about future efficiency overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences

the short run and long run effects of behavioral interventions experimental evidence from energy conservation we document three remarkable features of the opower program in which social comparison based home energy reports are repeatedly mailed to more than six million households nationwide first initial reports cause high frequency action and backsliding but these cycles attenuate over time second if reports are discontinued after two years effects are relatively persistent decaying at 10 20 percent per year third consumers are slow to habituate they continue to respond to repeated treatment even after two years we show that the previous conservative assumptions about post intervention persistence had dramatically understated cost effectiveness and illustrate how empirical estimates can optimize program design jel d12 d83 l94 q41

the effects of anticipated inflation on housing market equilibrium an increase in the anticipated rate of inflation causes distortions in the housing market due to a nonindexed tax system since nominal rather than real interest payments are tax deductible an increase in inflation decreases the aftertax cost of capital for homeowners which in turn increases the demand for housing and increases its real price this tax gain is shown to be larger for rental housing than for owner occupied housing in a competitive market this implies that although the real price of housing increases with a rise in anticipated inflation real rental rates fall in the last decade the real price of corporate capital fell while the price of housing increased dramatically during this same period the rate of inflation increased substantially empirical studies have found a negative relationship between stock returns and the inflation rate 1 while housing has been found to have been a good hedge against inflation 2 tax distortions related to the change in the rate of inflation provide one popular explanation for the negative relationship between stock prices and inflation 3 the effect of similar tax induced distortions on the equilibrium in the housing market will be studied in this paper it is shown that the real price of housing increases with the anticipated rate of inflation while the real rental rate declines these results are consistent with published data for the period 1967 77 during which the anticipated rate of inflation increased substantially 4 the general price level as measured by the consumer price index increased 81 5 percent between 1967 and 1977 5 in this

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

how do consumers avoid penalty fees evidence from credit cards using data from multiple card issuers we show that the most common penalty fee type incurred by credit card holders late payment fees declines sharply over the first few months of card life thi

agriculture fisheries and food in the irish economy throughout the celtic tiger years the contribution of agriculture to irish gross domestic product and employment declined as other sectors of the economy boomed not surprisingly interest in the sector over this period from both the popular media and public representatives declined however since the start of the downturn in ireland s economic fortunes in late 2007 there has been a renewed interest in the sector the irish government s food harvest 2020 strategy has set ambitious targets for the expansion of the irish agricultural fisheries and food sector but the achievement of these targets will be dependent on overcoming a number of structural and environmental constraints this paper examines the characteristics of this important indigenous sector in the irish economy and the major constraints facing it this study concludes with a discussion on whether or not the agriculture fisheries and food sector is in a position to contribute to ireland s economic recovery

irreversible investment with uncertainty and scale economies abstract optimal irreversible investment policy is analyzed when profits undergo multiplicative geometric brownian shocks the marginal product of capital increases initially and then decreases in the latter range it is optimal to add capacity gradually as the shock rises to a threshold where the expected return on the marginal unit is a multiple of its cost reflecting the option value of waiting the optimal policy in the increasing marginal product range obeys the same multiple now applied to the total return on an optimal discrete capacity addition implications for economic growth and suboptimal equilibria under external economies are examined

entering a preannounced currency band abstract krugman 1988 provides a stationary characterisation of an exchange rate inside a currency band here we derive the non stationary solution for a floating exchange rate which applies when currency dealers expect such a band to be imposed at a known future date

using differences in knowledge across neighborhoods to uncover the impacts of the eitc on earnings we develop a new method of estimating the impacts of tax policies that uses areas with little knowledge about the policy s marginal incentives as counterfactuals for behavior in the absence of the policy we apply this method to characterize the impacts of the earned income tax credit eitc on earnings using administrative tax records covering all eitc eligible lers from 19962009 we begin by developing a proxy for local knowledge about the eitc schedule the degree of sharp bunching at the exact income level that maximizes eitc refunds by individuals who report self employment income the degree of self employed sharp bunching varies signi cantly

portfolio choice and trading in a large 401 k plan we study nearly 7 000 retirement accounts during the april 1994 august 1998 period several interesting patterns emerge most asset allocations are extreme either 100 percent or zero percent in equities and there is inertia in asset allocations equity allocations are higher for males married investors and for investors with higher earnings and more seniority on the job equity allocations are lower for older investors there is very limited portfolio reshuffling in sharp contrast to discount brokerage accounts daily changes in equity allocations correlate only weakly with same day equity returns and do not correlate with future equity returns

the linkage between speculative attack and target zone models of exchange rates in this paper we generalize the target zone exchange rate as model formalized by krugman 1988b to include finite sized interventions in defense of the zone the main contributions of these pages consist of linking the recent developments in the theory of target zones to the mirror image theory of speculative attacks on asset price fixing regimes and in using aspects of that linkage to give an intuitive interpretation to the smooth pasting condition usually invoked as a terminal condition this abstract was borrowed from another version of this item

how are snap benefits spent evidence from a retail panel we use a novel retail panel with more than six years of detailed transaction records to study the effect of participation in the supplemental nutrition assistance program snap on household spending we frame our approach using novel administrative data from the state of rhode island the marginal propensity to consume snap eligible food mpcf out of snap benefits is 0 5 to 0 6 the mpcf out of cash is much smaller these patterns obtain even for households for whom snap benefits are economically equivalent to cash in the sense that benefits do not cover all food spending we reject the hypothesis that households respect the fungibility of money in a semiparametric framework a model with mental accounting can match the facts

the mortgage interest deduction and its impact on homeownership decisions abstract this paper examines the impact of the combined u s state and federal mortgage interest deduction mid on homeownership attainment using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the mid within and across states over time we test whether capitalization of the mid into house prices offsets the positive effect on homeownership we find that the mid boosts homeownership attainment only of higher income households in less tightly regulated housing markets in more restrictive places an adverse effect exists the mid is an ineffective policy to promote homeownership and improve social welfare

an alternative method for identifying booms and busts in the euro area housing market this article develops a model based method to detect booms and busts in the euro area housing market a model is constructed and tested whereby the user cost rate a demographic variable unemployment rate disposable income debt to income ratio and housing stock are fundamental variables significantly explaining house price hp developments booms busts are identified as episodes when the hp index exceeds the levels implied by those economic fundamentals furthermore a cross check with boom bust episodes based on other methods is carried out to substantiate the results while the ability of the model in predicting booms busts in real time is also tested

portfolio inertia and stock market fluctuations this paper uses population wide data from the panel study of income dynamics and the survey of consumer finances to resolve the conflict between overtrading and inactivity shown in administrative data on brokerage and retirement accounts respectively considerable inertia is found and linked to characteristics e g limited education or resources but less to index movements the downswing has encouraged staying out rather than getting out of the market the small minority with brokerage accounts exhibits important differences in trading patterns relative to the population and invests small fractions of wealth in brokerage accounts results strengthen the case for default options in retirement accounts and built in trading provisions in mutual funds

do liquidity constraints and interest rates matter for consumer behavior evidence from credit card data this paper utilizes a unique new dataset of credit card accounts to analyze how people respond to changes in credit supply the data consist of a panel of thousands of individual credit card accounts from several different card issuers with associated credit bureau data we estimate both marginal propensities to consume mpcs out of liquidity and interest rate elasticities we also evaluate the ability of different models of consumption to rationalize our results distinguishing the permanent income hypothesis pih liquidity constraints precautionary saving and behavioral models we find that increases in credit limits generate an immediate and significant rise in debt counter to the pih the average mpc out of liquidity ddebt dlimit ranges between 10 14 the mpc is much larger for people starting near their limits consistent with binding liquidity constraints however the mpc is significant even for people starting well below their limit we show this response is consistent with buffer stock models of precautionary saving nonetheless there are other results that conventional models cannot easily explain e g why so many people are borrowing on their credit cards and simultaneously holding low yielding assets unlike most other studies we also find strong effects from changes in account specific interest rates the long run elasticity of debt to the interest rate is approximately 1 3 less than half of this elasticity represents balance shifting across cards with most reflecting net changes in total borrowing the elasticity is larger for decreases in interest rates than for increases which can explain the widespread use of temporary promotional rates the elasticity is smaller for people starting near their credit limits again consistent with liquidity constraints

learning from others hiv testing updating beliefs and responding to risk extending the seminal work of von neumann and morgenstern 1944 savage 1954 advanced a theory that allows decision makers to maximize expected utility based on subjective probabilities of different states when objective probabilities are unknown since then an extensive theoretical and empirical literature has explored how beliefs are formed or updated and how they affect behavior dominitz and manski 1997 manski 2004 one line of research has studied subjective beliefs in the context of testing and learning results for a variety of health conditions such as huntington s disease cervical cancer and breast cancer oster shoulson and dorsey 2013 okeke adepiti and ajenifuja 2013 and lange 2011 among others in this context receiving a diagnosis provides objective information that individuals can use to make decisions optimizing for the future in contrast to noncommunicable diseases some diseases such as hiv allow for behavioral responses to testing that can affect the spread of the disease in this paper we examine how beliefs and behavior are affected by hiv testing in rural malawi we extend the existing literature by studying the impact of others testing on

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

cellular service demand biased beliefs learning and bill shock by april 2013 the fcc s recent bill shock agreement with cellular carriers requires consumers be notied when exceeding usage allowances will the agreement help or hurt consumers to answer this question we estimate a model of consumer plan choice usage and learning using a panel of cellular bills our model predicts that the agreement will lower average consumer welfare by 2 per year because rms will respond by raising monthly fees our approach is based on novel evidence that consumers are inattentive to past usage meaning that bill shock alerts are informative and advances structural modeling of demand in situations where multipart taris induce marginal price uncertainty additionally our model estimates show that an

do customers learn from experience evidence from retail banking we study customers adoption and subsequent switching decisions with regard to a menu of three part tariff plans offered by a commercial bank using a rich panel data set covering 70 510 fee based checking accounts over 30 months before and after the introduction of the plans we find that most customers adopt non cost minimizing plans preferring plans with large monthly allowances and high fixed payments furthermore after adoption customers who exceed their allowances and consequently pay overage fees are more likely to switch to plans with larger allowances than customers who do not experience such fees notably after switching these overage paying customers pay higher monthly payments than before in contrast switching customers who did not pay overage payments before switching pay less after switching our findings unlike those of previous research on experience based learning suggest that the behavior of experienced customers does not converge to the predictions of neoclassical models we p

the vulnerability of price stabilization schemes to speculative attack this paper examines the effects of government attempts to stabilize the prices of commodities by use of buffer stocks agricultural goods subject to supply uncertainty as well as depletable resources are considered in each case it is shown that the resulting rational expectations competitive equilibrium contains a speculative attack a situation where the entire government stock is suddenly purchased by previously inactive speculators the analysis is applied to the historical attempt to peg the gold price which caused the attack of 1968 the insights gained and the methodology developed also apply to the various international agreements to impose bans on commodity prices which have been proposed by the united nations conference on trade and development

choosing the wrong calling plan ignorance and learning when a firm offers several tariff options to its customers the possibility arises that they will make an ex post mistake in tariff choice this occurs since consumers cannot commit to a certain purchase level at the time they subscribe to the service option and thus they might find out later that a different choice of tariff could have resulted in a lower payment for their actual level of consumption this is a common feature of increasingly important subscriptions markets in which buyers and sellers maintain long term nonanonymous relations and where learning induces interesting dynamics on the one hand buyers may learn their taste over time thus making the right choice as times goes by on the other hand the seller may design options to identify the type of each buyer and if possible to extract a higher proportion of their consumer surplus by offering tariff options that are better tailored to the profile of the consumer this paper focuses on the first type of learning in turn i document buyer behavior in a subscriptions market using data from a tariff experiment run by south central bell scb in kentucky during the second half of 1986 the most frequently studied case of subscriptions markets is the choice among optional calling plans ocps in the telephone industry this paper shows that contrary to the conven

the transition to home ownership and the black white wealth gap this paper analyzes differences in the likelihood that black and white families become homeowners by following a sample of black and white renters over time we are able to separately study racial differences in the likelihood of applying for a mortgage and in the likelihood that a mortgage application is accepted although its effect on the race gap in housing transitions is small we find strong evidence that black applicants are almost twice as likely as comparable white households to be rejected even when credit history proxies and measures of household wealth are accounted for we show that the housing transition gap exists primarily because blacks are less likely to apply for mortgages in the first place the analysis suggests that differences in income family structure and in the ability and willingness of parents to provide down payment assistance are the primary reasons for this applications gap we speculate that the portion of the gap that remains unexplained after controlling for income d

the impact of fracking activities on oklahoma s housing prices a panel cointegration analysis abstract fracking drilling has opened a discussion on the role of technological developments in economies engaged in shale oil and gas formations oil and natural gas production opened new possibilities for employment benefits and housing prices decreases this paper explores for the first time the impact of fracking on housing prices across oklahoma s counties spanning the period 2000 2015 through panel methods the findings show a positive effect on housing prices while this positive effect gains statistical significance only over the period after the 2006 fracking boom the results survive a robustness check that explicitly considers distance and groundwater dependency issues

learning through noticing theory and evidence from a field experiment we consider a model of technological learning under which people learn through noticing they choose which input dimensions to attend to and subsequently learn about from available data using this model we show how people with a great deal of experience may persistently be off the production frontier because they fail to notice important features of the data they possess we also develop predictions on when these learning failures are likely to occur as well as on the types of interventions that can help people learn we test the model s predictions in a field experiment with seaweed farmers the survey data reveal that these farmers do not attend to pod size a particular input dimension experimental trials suggest that farmers are particularly far from optimizing this dimension furthermore consistent with the model we find that simply having access to the experimental data does not induce learning instead behavioral changes occur only after the farmers are presented with summaries that highlight previously unattended to relationships in the data jel codes d03 d83 o13 o14 o30 q16

borrowing on the wrong credit card evidence from mexico abstract we establish new facts about the way consumers allocate debt among their credit cards using data for a representative sample of cardholders in mexico we find that relative prices are weak predictors of the allocation of debt purchases and payments consumers allocate a large fraction of their debt to high interest cards incurring a cost of 31 percent above the minimum using an experiment we find that consumers do not substitute in the price margin although they respond to salient temporary low interest offers we conclude that limited attention and mental accounting best rationalize our results and discuss implications for the market jel d14 g21 o12 o16

consumer inertia choice dependence and learning from experience in a repeated decision problem abstract understanding when and how individuals think about real life problems is a central question in economics this paper studies the role of inertia inattention state dependence and learning the empirical setting is a tariff experiment when optional measured tariffs for local telephone calls were introduced unanticipatedly we find that consumers tend to align their choices of tariff and telephone use levels correctly despite low potential savings mistakes are not permanent as individuals actively engage in tariff switching in order to reduce the monthly cost of telephone service ignoring unobservable heterogeneity and the endogeneity of past choices would have reversed these results

does high cost of mortgage debt explain why young adults live with their parents young adults leave their parents homes at a higher rate in northern europe or in the united states than in southern europe with broad implications on labor market mobility and on fertility we assess if differences in household formation are associated to differences in access to credit by estimating the impact of the cost of a mortgage on the probability that a young adult leaves his or her parents home exogenous changes in the cost of credit are identified using the reform in 1998 and the cancellation in 2002 of credito bonificado a portuguese program that provided four different reductions of the interest rate of mortgages signed by low and medium income youth using a unique data set that links administrative records of debt with the 1998 2004 waves of the employment survey we document three findings first borrowing among young adults fell when borrowing costs increased second the elasticity of new household formation with respect to net interest rates lies between 0 8 and 3 3 third young adults responded to the increase in mortgage costs by delaying home purchases or by reducing the quality of housing services purchased but there was only a modest increase of the probability of renting a new accommodation jel d91 h24 j13

hot and cold seasons in the housing market every year housing markets in the united kingdom and the united states experience systematic above trend increases in prices and transactions during the spring and summer hot season and below trend falls during the autumn and winter cold season house price seasonality poses a challenge to existing housing models we propose a search and matching model with thick market effects in thick markets the quality of matches increases rising buyers willingness to pay and sellers desire to transact a small deterministic driver of seasonality can be amplified and revealed as deterministic seasonality in transactions and prices quantitatively mimicking seasonal fluctuations in uk and us markets

competitive runs the case of a ceiling on aggregate investment abstract decentralized investment decision in markets with limits on aggregate investment give rise to endogenous and repeated runs sudden switches of asset holdings by large groups of small agents this paper studies a model of recurrent runs in a competitive market with stochastic returns and adjustment costs the properties of the model are discussed using examples from models of investment in exhaustible resources of capital controls of runs on banks limited reserves

what do consumers really pay on their checking and credit card accounts explicit implicit and avoidable costs consumers in the united states make billions of transactions each year using cash checks debit cards and credit cards bank and credit card accounts provide consumers with liquidity to clear and settle these transactions in return consumers pay a variety of fees and both explicit and implicit interest charges the importance of retail banking and credit markets to economic activity drives interest in many open policy and research questions do households borrow too much relative to a neoclassical benchmark christopher d carroll 2001 why do many households leave a substantial amount of money on the table in managing their accounts sumit agarwal et al 2006 david gross and nicholas souleles 2002 do firms structure pricing to exploit consumer cognitive biases or limitations stefano dellavigna and ulrike malmendier 2004 xavier gabaix and david laibson 2006 how do learning sumit agarwal john driscoll and gabaix 2008 and disclosure regulation stango and zinman 2009b interact with consumer decision making and firm strategy to determine market outcomes this paper examines some threshold questions that should inform the questions above what do people really pay to use their bank and credit card accounts and which cost components are the largest of all the costs that people pay which could they easily avoid by making different day to day choices and how stable are both the level of costs and the share of costs that are avoidable for a given person over time what do consumers really pay on their checking and credit card accounts explicit implicit and avoidable costs