Temporal dynamics of payment choices: unraveling the interplay between time preferences and credit card utilization in Japan

This study investigates whether the present bias influences the payment behavior of credit card holders in Japan. We hypothesize that credit card holders with present bias prefer to delay bill payment, even at the cost of accepting interest charges. To test this hypothesis, we utilize a dataset comprising 128,032 observations from a leading securities company. Our analysis reveals that a significant number of respondents indeed delayed credit card bill payments, suggesting a potential association with present bias behavior. Probit regression models further confirm the link between impatience, impulsivity, and credit card payment behavior. Specifically, impatience and impulsivity exhibit a positive association with credit card payments, indicating that impatient and impulsive credit card users are more likely to postpone payment, even when interest charges are incurred. The implications of this study extend to both credit card users and issuers, highlighting the influential role of impulsivity in the timely payment of bills. This study investigates how present bias affects credit card payment behavior in Japan. Analyzing 128,032 observations from a major securities company, it finds that impatient and impulsive users are more likely to defer payments. The findings of this research have crucial implications for both credit card users and issuers. For users, understanding the role of impulsivity in payment behavior can lead to more informed financial decisions and strategies to avoid unnecessary interest charges. For issuers, recognizing the patterns of present bias can inform the development of products and policies aimed at encouraging timely payments, ultimately benefiting both parties. This study contributes to the literature by providing empirical evidence on the time-inconsistent behavior of Japanese credit card holders and underscores the need for tailored financial education and interventions to mitigate the effects of present bias in financial decision-making.