Same Storm, Different Disasters: Consumer Credit Access, Income Inequality, and Natural Disaster Recovery

Abstract

Natural disasters often produce large income shocks to households. We analyze the impact of natural disasters on household finances. Using a triple differences approach, we estimate the effect of natural disasters on credit card outcomes for individuals in varying financial positions receiving access to different types of FEMA aid. With the exception of those living in low income areas, we find few negative impacts on credit outcomes of most individuals living in areas hit by disasters that qualify for individual and household aid. Though all types of individuals affected by disasters show some signs of increasing credit utilization, the most vulnerable populations are also more likely to declare bankruptcy. While many are able to use credit cards to smooth through negative income shocks from natural disasters, current policy appears to leave the worst off even worse off.