Research across multiple countries shows that a significant portion of households maintain both liquid assets and revolving credit debt, highlighting complex risk management habits despite high borrowing costs.
A new study highlighted by Ask the Money Coach suggests that carrying credit card debt while keeping cash in savings is far more common than many households might assume. The research, conducted by Rafael M. Batista of the University of Chicago Booth School of Business, Ella Mao of Stanford Graduate School of Business and Abigail B. Sussman of the University of Chicago Booth School of Business with a large Australian retail bank, found that about 23% of card customers were “co-holders” – people with both liquid assets and interest-bearing card debt. The analysis covered more than 2,000 customers and roughly 3 million transactions, using a definition that required at least $500 in liquid assets and $500 in revolving debt over three consecutive billing periods.
The behaviour is not limited to one country. A 2024 study in Economics Letters found that in the euro area, 91% of people with credit card debt also held positive liquid assets, and more than 70% could repay their debt despite high rates. The authors linked the pattern to risk preferences and credit constraints, suggesting that the tension between saving and borrowing is not simply a matter of arithmetic. In the United States, the Consumer Financial Protection Bureau has found something similar: many consumers know credit card rates are higher than savings rates, yet still hesitate to use savings to pay down debt.
That reluctance may reflect a desire to preserve a financial cushion. The CFPB’s 2021 experiment found that consumers generally tried to keep some savings even when asked to consider using it to reduce card balances, and in nine out of ten scenarios fewer than half of participants used the maximum possible amount of savings to clear debt. In other words, people often treat emergency savings as untouchable, even when the debt costs far more than the cash earns.
The problem is growing against a backdrop of stubbornly high borrowing costs. Federal Reserve data cited in the supplied material put total U.S. credit card debt at $1.21 trillion in the fourth quarter of 2024, with an average annual percentage rate of 22.8% and an average balance of $6,501 per cardholder. Bankrate’s 2025 survey found that 48% of cardholders carried a balance from month to month, while 53% of those in debt had been carrying it for at least a year. The most common reasons were emergency expenses and day-to-day spending, underscoring how easily temporary shortfalls can turn into long-running debt.
Researchers also point to a behavioural trap: saving can unintentionally coexist with borrowing. A 2024 paper by Paolina C. Medina and Michaela Pagel, based on an experiment involving 3.1 million bank customers encouraged to save, found that the most responsive customers increased savings by about 4.9%, or roughly $206 a month, while their credit card debt did not fall. That helps explain why households may improve one part of their finances without reducing expensive revolving balances. The practical answer, financial advisers say, is not to empty every account, but to keep a modest emergency reserve and use any genuine surplus to attack the highest-rate debt first.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
