Using a representative sample of credit card holders from a Chinese commercial bank with a 10% credit card market share, we investigate how consumers respond to an unexpected interest rate decrease that automatically reduces interest expenses for all mortgagors in the country and thereby generates significant positive disposable-income shocks. Our difference-in-differences analysis shows that compared with homeowners without mortgage obligations, mortgagors increased their monthly credit card spending by 7.2% after the 230bps mortgage rate reduction announced in September 2008. We find a significant spending response both immediately after the announcement and during the post-reset period. The credit card delinquency rate also decreased after the mortgage rate reset. Subsequent to an interest-rate-increase episode, mortgagors symmetrically reduced their credit card spending. Hand-to-mouth consumers experienced a pronounced spending increase, even among those with a high credit limit, and their response was concentrated in the post-reset period. The debt-service channel plays an important role in transmitting monetary policy—our estimate implies a marginal propensity to consume (MPC) of 0.40-0.51 through credit card spending.