Financial Sophistication and Credit Card Behaviors Revision

Abstract

The present study explored consumers’ use of credit cards with an emphasis of the role that financial knowledge plays in behavior. Both objective and subjective measures of subjective financial knowledge were included in predictive models of seven unique credit card behaviors. Behaviors explored included comparing cards during the acquisition phase, paying off cards in full, revolving a balance, making minimum payments, paying late payment fees, paying over the limit fees, and taking cash advances. Results indicated that financial knowledge was a useful predictor of behavior, though different knowledge types were more or less effective as predictors depending on the behavior analyzed. An additional series of analyses was conducted controlling for emergency saving ownership. Implications are discussed.