Many households borrow on credit cards at high rates while holding low-yielding bank account balances. This borrowing high and lending low (BHLL) does not violate no-arbitrage, or require psychological explanations, because credit cards and demand deposits are different assets. The latter are more liquid and hence have implicit value. In principle then BHLL is not a puzzle per se for neoclassical models. In practice BHLL might cast some doubt on the descriptive power of traditional rationality. But simple calculations show that costly BHLL is not prevalent, particularly after one accounts for the implicit value of liquid assets.
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