Piercing through Opacity : Relationships and Credit Card Lending to Consumers and Small Businesses during Normal Times and the COVID-19 Crisis

We investigate bank relationships in a rarely-considered context – consumer and small business credit cards. Using over one million accounts, we find during normal times, consumer relationship customers enjoy relatively favorable credit terms, consistent with the bright side of relationships, while the dark side dominates for small businesses. During COVID-19, both groups benefit, reflecting intertemporal smoothing, with more benefits flowing to safer relationship customers. Conventional banking relationships benefit consumers more than credit card relationships, with mixed findings for small businesses. Important identification issues are addressed. CARES Act consumer-delinquency reporting impediments reduce the informational value of consumer credit scores, penalizing safer borrowers