We study how lender responses to consumer biases affect credit card debt. Using account-level credit bureau data, we document a new fact: many consumers make near-minimum credit card repayments while also overpaying lower-interest installment debt. We estimate an empirical model in which lenders optimally set minimum payments given this behavior. Because some liquid consumers make near-minimum payments, lenders lower minimums to slow repayment, increasing high-interest debt balances and interest revenue. Our model implies that this lender response increases revolving debt by $46 billion. This finding illustrates how optimizing lenders can amplify the effects of consumer biases in equilibrium.

We study revenue-based financing, an emerging capital source for small firms in low- and middle-income countries. Using transaction-level data from a South African payment platform, we show firms that take financing process 16% less revenue through the platform than observably similar non-takers after eight months, slowing repayment. Two natural experiments show this reflects moral hazard from firms diverting revenue and adverse selection. Repayment improves when firms use the platform’s other services (e.g., inventory management tools), and screening improves with longer histories and repeat financing. Our results highlight the frictions with flexible repayment models in developing economies, and how providers mitigate them.

As young adults in advanced economies have become increasingly pessimistic about their economic prospects in recent years, gambling-like financial activities have proliferated. We link these trends through a Friedman-Savage (1948) motive: when life goals such as homeownership or marriage seem out of reach, individuals turn to financial gambles. We test the theory using an original survey combined with millions of linked records from Korea’s leading credit bureau, telecom provider, and credit card issuer. Consistent with the theory, individuals who place greater importance on hard-to-reach financial goals are more likely to exhibit risk-seeking preferences and to engage in high-risk investment. Conversely, when goals become attainable, risk-taking declines: exploiting Korea's housing lottery, which quasi-randomly allocates subsidies for home purchase, we show that attaining homeownership reduces interest in cryptocurrency. We conclude with a stylized calibration that shows how goal-driven risk preferences can amplify the welfare costs of overoptimism.

Why do some non-financial firms rely on revenue from consumer financial products? At several large U.S. retailers, direct revenues from credit card partnerships exceed total operating income. This paper proposes a theory of behavioral cross-selling, in which firms use their access to customers to cross-sell products that capitalize on behavioral biases, such as inattention or forgetfulness. We test our theory in the retail credit card market using data from a major credit bureau. Although retail cards account for only 17% of balances in our sample, they generate 45% of missed minimum payments, triggering late fees. Liquidity constraints cannot fully explain missed minimums: among individuals with multiple cards, nearly half of missed payments on retail cards could have been avoided by reallocating excess payments from other cards. Consistent with the theory, firms in locations with more avoidable missed payments are more likely to offer retail cards and provide larger sign-up incentives.

This thesis studies the Paycheck Protection Program (PPP)—a $660 billion small business loan program enacted in April 2020 in response to the COVID-19 pandemic. The majority of small businesses could apply for (and receive) a forgivable loan, but PPP uptake differs dramatically across space. To study this geographic variation, I present a theoretical framework for PPP and use a combination of county and firm-level data to demonstrate that places that received very little PPP overall had both low bank and low business human capital. Factors such as COVID-19 impact or political attitudes were not key determinants in predicting PPP uptake.