Federal Reserve Bank of St. Louis – In The Balance – Emily Gallagher and Jorge Sabat 11/2017

Why would someone keep $1,000 in a low-earning bank account while owing $2,000 on a credit card that charges a double-digit percentage interest rate?

Our research suggests that keeping a cash buffer greatly reduces the risk that a family will miss a payment for rent, mortgage or a recurring bill, will be unable to afford enough food or will be forced to skip needed medical care within the next six months…