Where Does It Go? Spending By The Financially Constrained

In this paper, the authors analyze the spending decisions of over 1.5 million Americans who vary in their degree of revealed credit constraints. Specifically, they analyze how these Americans spend their income tax refunds, using transaction-level data from a stored-value card product. Those selecting earlier settlement options pay higher fees and interest, therefore revealing the level of credit constraints or impatience. Finally, the primary merchant uses of refunds are to pay for necessities and the fraction of the refund spending devoted to these necessities is higher for those with greater revealed credit constraints.