A third of American adults pay more interest than necessary, behavior which is both costly and complex. The behavioral pattern is known as co-holding, which entails consumers’ reluctance to use their liquid assets in order to reduce their debt levels.
Economists have been studying co-holding for more than two decades. A new survey, commissioned by the financial solutions company Vericast, provides additional insight into why American consumers co-hold, and which consumers might be nudged to reduce their co-holding behavior.
The co-holding landscape is complicated. The most prominent reason consumers co-hold is to exercise self-control in their spending and borrowing behavior. Consumers who engage in impulse buying have the greatest need for self-control. In this regard, consumers who report being spontaneous spenders are much more prone to engage in co-holding than others.
Most co-holders are white, because the majority of Americans are white. However, the propensity to co-hold is significantly stronger for minorities than for whites; and it is stronger for consumers with household incomes of $50,000 and above. In addition, co-holders are concentrated among people who are 45 and younger. Notably, 60% of GenZ and Millenials co-hold, just under double the population average. The majority of co-holders report being diligent at household budgeting; but they also report not feeling in control, or confident, of their finances.
Economist Neale Mahoney has co-authored work on co-holding which is currently circulating as a working paper. He comments that “My work on co-holding points to challenges in creating successful interventions for reducing co-holding behavior. The new data from Vericast provide new insights for understanding the obstacles preventing the creation of successful interventions.” Mahoney is the Trione Director of Stanford Institute for Economic Policy Research (SIEPR), and the TG Wijaya Professor of Economics at Stanford University.
Analysis of the Vericast data reveal that men are much more willing than women to sign up for a service offered by a financial services firm that would help them pay less interest by reducing their co-holding behavior. Minorities, especially African Americans and Native Americans are more willing to sign up than whites. Americans who are 45 and under are more willing to sign up than older Americans. That said, among those who are 45 and younger, GenZ are the least willing to sign up, and display the most distrust of financial institutions.
Academic Studies On Co-holding
Academics have been studying co-holding for more than two decades. Early studies using data from the U.S. report that a third of consumers with credit card debt held at least two months of disposable income available in liquid savings. A recent study using data from Australia reports that co-holders paid excess interest of about $200 per year (USD).
There are at least three main reasons why people co-hold:
- lack of awareness, possibly related to low financial literacy or competing demands for attention;
- purposeful budgeting behavior related to self-control; and
- inertia, otherwise known as status quo bias.
The study using Australian data finds that 25% co-holders report lacking awareness of their co-holding behavior, and its associated cost. The remaining 75% are therefore aware of the fact that they co-hold, and overpay interest.
Economists have long studied behavior patterns where consumers either earn insufficient interest or pay excessive interest. The classic example of consumers acting in this way involves Christmas clubs. Christmas clubs are accounts at financial institutions in which deposits are earmarked to finance holiday gifts. Traditionally, these accounts paid no interest and featured early withdrawal fees. Despite the fact that consumers could use ordinary interest bearing savings account to accumulate money for holiday gifts, many nonetheless used non-interest bearing Christmas clubs.
Historically, Christmas clubs have been popular because they focus consumers on the need for to make regular financial contributions during the year in order to fund an important dedicated goal. The alternative, contributing to a general savings account, lacked focus as a feature. Instead, general savings accounts potentially tempt consumers to spend the money earlier in the year on competing, tempting items. The popularity of Christmas clubs demonstrated that consumers were willing to pay a price, in the form of foregone interest, in order to achieve the self-control necessary to achieve a specific goal.
There is a parallel situation to Christmas clubs in which consumers hold liquid assets that are earmarked for funding a specific purpose, and simultaneously pay interest on their credit card debt. In this respect, the study using data from Australia mentions emergency preparedness as a goal of co-holders. Some economists have argued that co-holding behavior involves consumers being more impatient when they spend using their credit cards than when they pay the balances on these cards.
Some contributions to the academic literature suggest that co-holding is planned behavior. A study from the U.K. found that cardholders paid about $1000 a year more in interest than necessary. The authors of the study suggest that many consumers might co-hold in order to control their tendency to make impulsive purchases. This is because co-holding leads to higher credit card balances, and higher costs in the form of higher interest paid. The study concluded that self-control positively predicts co-holding. The study also examined the role of financial literacy in co-holding, and concluded that financial literacy does raise the likelihood of co-holding, noting that co-holders exhibit significantly less self-control than those who do not co-hold.
A study using data from Iceland found that consumers exhibit behavior known as matrix mental accounting, whereby they fund specific types of purchases from particular sources of funds. Specifically, consumers are willing to use overdrafts (that is, borrowing) to engage in activities such as expenditures on lottery tickets, gambling, alcohol, and fuel. Notably, these activities are typically involve more temptation than others.
The Statistics On Why Consumers Co-hold
Vericast states that its co-holding survey was conducted between October 23 and October 24, 2025. Vericast engaged the global market research company Dynata to survey a total of 1,000 adults, aged 18 and older, across the U.S. The study was conducted at 95% confidence with a margin of error of +/- 3%. The Vericast team shared their data with me, along with a preliminary analysis which I extended.
With this as context, among survey respondents, 34% co-hold. Notably, this figure is in line with the earlier academic study using U.S. data.
In the context of co-holding, self-control relates to consumer budgeting. Some consumers set specific goals, some set general goals, and the rest do not set explicit goals. The survey evidence suggests that co-holders report being more deliberate goal setters than those who do not co-hold, report being more disciplined about consumer budgeting, but profess to have the lowest control and lowest confidence in managing their household finances.
In a nutshell, the survey data suggests that co-holders are more disciplined about consumer budgeting than those who do not co-hold. Among those holding liquid assets, 47% co-hold. Among co-holders, 89% set either specific or general goals.
Notably, among consumers setting specific goals, 42% co-hold; and 21% do not hold liquid assets. Among those holding liquid assets, 53% co-hold. In contrast, among those who do not set explicit goals, only 20% co-hold, and 41% do not hold liquid assets.
A third of co-holders report that they rely on their credit cards to fund emergency purchases. More striking is the fact that among those that rely on their credit cards to fund emergency purchases, 75% are co-holders.
Whether or not they are co-holders, consumers who rely on credit cards to fund emergency purchases tend to be disciplined at household budgeting. About 47%, or nearly half of consumers relying on credit cards to fund emergency purchases report that they set specific budget goals, and 57% report being either highly deliberate or mostly deliberate spenders. Consumers relying on credit cards to fund emergency purchases also report high levels of control (73%) and confidence (57%) in managing their household finances.
Consider respondents who report that they are highly deliberate, plan most purchases carefully, and stick to a budget. This group comprises 18% of the sample. Among this group, 71% report having liquid assets, and among those with liquid assets, 52% are co-holders.
In contrast, consider respondents who report being spontaneous spenders, either rarely or never planning their purchases. This group is associated with the lowest self-control, and the most vulnerable when facing temptation. Of this group, more than 60% are co-holders, the most of any of the budgeting categories. This fact suggests that those with the weakest self-control rely most heavily on co-holding when spending.
Within the sample, co-holders profess to have the lowest control and lowest confidence in managing their finances. Among co-holders, 60% report having low control and low confidence. In contrast, among those who do not co-hold, the figure is closer to 35%.
Among co-holders, when asked why they co-hold, 52% state that they know they could save on interest, but prefer to keep their liquid assets untouched, for example to maintain savings or liquidity. Another 24% state that they know they could save on interest, but that it feels like too much of a hassle to do so. The same percentage, 24%, report that they have not really thought about using their liquid assets to reduce interest payments.
Findings in the literature based on data from the U.K. show that co-holding is not associated with poor financial literacy or lack of education, but is associated with lack of self-control. Co-holders are mostly of working age and have above average levels of education, employment and household income. However, co-holders self-report high rates of impulsive spending behavior. These findings are consistent with the suggestion that co-holding is planned behavior.
Co-holding is complex, and there is no single reason why consumers co-hold. Among co-holders, 45% report self-control as the main reason for co-holding. Self-control is the dominant reason; however, the percentage reporting lack of awareness is 29%, and the percentage reporting inertia (status quo bias) is 26%.
The Statistics On Who Co-Holds
Although most co-holders are white, whites are underrepresented in the co-holder population. African Americans, Latinos, and other minorities are overrepresented. Families with children are overrepresented. People under age 46, without college degrees, and with above average incomes are overrepresented. The employed are overrepresented. However, as discussed below, being overrepresented in a group is not the same as dominating the group.
In a nutshell, the main factors related to co-holding behavior appear to be age, income, employment, and level of educational attainment. Other relevant factors are family circumstances and ethnicity. Women have a slightly higher propensity to co-hold than men. Below is a summary of the main findings describing who co-holds.
Among sample respondents, 34% indicate that they co-hold by holding liquid assets and simultaneously paying interest on their credit card debt. Co-holders are concentrated among people below age 46: 64% of co-holders are in this group. Notably, 60% of GenZ and Millenials co-hold, far more than the 34% average.
Household income is a major factor when it comes to co-holding. In line with the data from the U.K., 75% of co-holders have incomes that are $50,000 and above; and 32% of co-holders have incomes that are $100,00 and above. That said, these groups are underrepresented in the subsample of co-holders. Indeed, those with annual incomes below $25,000 are most prone to co-hold; and with one exception, the generational tendency to co-hold declines with income. Not surprisingly, those with incomes below $25,000 are concentrated among GenZ.
Those who are fully employed are more prone to co-hold than any other group, except for students and those on disability. Among the fully employed, 54% co-hold; and the fully employed comprise 61% of co-holders.
Education is also a major factor when it comes to co-holding. Almost 80% of co-holders have attended college, although some might not have graduated. Those most prone to engage in co-holding have high school diplomas at most, or have graduated from technical/vocational programs. For example, 80% of those who have not graduated from high school are co-holders; and for high school graduates the corresponding figure is 57%. Notably, the relationship between co-holding and education appears to be different between the U.S. and the U.K.
Family circumstances: In respect to marital status, those who are separated, unmarried and living with partners, or single (never married) are the most prone to co-hold. That said, married co-holders and single co-holders who have never married comprise 80% of co-holders. Parents, meaning those with children, comprise half of co-holders; and 60% of parents are prone to co-hold, again compared to the 34% average. For those not living alone, 54% of co-holders live with at least two others and 76% live with at least three others.
In respect to ethnicity, overall, African Americans and Latinos are much more prone to co-hold than are Caucasian Americans. That said, whites make up about 70% of the population, and about 68% of co-holders.
Geographically, compared to those from the Northeast, Midwest, and West, those from the South are more prone to co-hold, and therefore comprise a disproportionate share of co-holders. This feature is consistent with the fact that African Americans are more prone to co-hold than other groups.
The Statistics On Nudging Co-holders To Pay Less Interest
Co-holders overpay interest. However, almost 40% of co-holders report being willing to sign up for services provided by financial institutions that would help them reduce the degree to which they overpay.
Sharon Cook is the Vice President of Marketing Strategy at Vericast. The findings from their new survey led her to say about the 40%: “This presents a new opportunity for financial institutions to show up for their consumers with more robust educational resources and flexible offerings to help them feel secure in their savings while also supporting their lifestyle preferences. To best support customers and members, financial institutions should double down on educating them on the drawbacks of growing debt while helping them meet their financial goals. Financial Institutions can revamp their debt management and personalized budgeting tools as well as messaging on simple and flexible loan options to meet consumers where they are. ”
Still, for the majority who report declining such a service, 39% give as their reason that they do not like turning control over to a financial institution. This is an issue of trust, meaning mistrust. As for those who report as the reason fearing that they would fail to achieve a savings goal, 18% fall into this category. The remainder do not report having enough knowledge or confidence to sign up for such a service.
In a nutshell, male co-holders are more willing to sign up than female co-holders. Consumers between the ages of 35 and 44 are the most willing to sign up. Those with incomes over $50,000, those with a university degree, and the fully employed are most willing to sign up. As for declining such a service because they distrust financial institutions, the list includes female co-holders, those with household incomes below $50,000, those without university degrees, owners or partners in a business, and those who are unemployed.
Consider some statistics, based on the Vericast data. Men report being more willing to sign up for the service than women. Almost half of male co-holders, 47% are willing, compared to 37% for females. In this regard, women who decline the service are 25% more distrustful of financial institutions than men.
Half of co-holders, aged 35 to 44, report being willing to sign up for the service, the largest among the different age groups. About a third of those willing to sign up are members of this age group. Of those in this age group who decline the service, just under 20% mistrust financial institutions. While consumers younger than 35 are more willing to sign up than average, members of GenZ are the least willing to sign up; and among those 35 and younger, they display the most distrust of financial institutions.
Co-holders with household income $50,000 and above report being willing to sign up for the service. This group comprises 80% of willing co-holders.
Co-holders with a university degree or a vocational degree express a willingness to sign up for the service. Interest is positively correlated with higher level degrees.
Co-holders who are fully employed or retired are the most willing to sign up for the service, 97% of the fully employed and 75% of retirees. Those who are owners or partners in a business, or who are unemployed, are most prone to decline the service because of a lack of trust in financial institutions.
Among co-holders who are either single or married or live with partners or have children, more than 40% report being willing to sign up for the service. Households consisting of three-to-five people express the most interest in such a service. About the same percentage of consumers who are divorced decline the service because they mistrust financial institutions.
Although whites comprise over 60% of those willing to sign up for the service, African Americans, Latinos, and native Americans report being the most willing to sign up for the service, with propensities in the 40-to-80% range. Those living in the south are the most willing to sign up for the service, while those in the Midwest are most apt to decline the service, for lack of trust.
Consider co-holders who set specific budgeting goals, are the most deliberate in keeping to their budgets, feel in control of their household budgets and have high confidence in their ability to manage household budgets well. These co-holders are most willing to sign up for the service.
Conclusion
Co-holding behavior is both costly and complex. The new Vericast survey data provides important insights into the who, what, where, and why of co-holding, as well as information about which co-holders might be nudged to reduce the degree to which they co-hold.