Investigating the associations of consumer financial knowledge and financial behaviors of credit card use

Abstract

The growing economic uncertainty makes consumers realize the importance of financial preparedness and management ability. Based on the U.S. National Financial Capability Study dataset from 2009, 2012, 2015, and 2018, this study explores the nexus between consumer financial knowledge and financial behaviors of credit card use. The results indicate that financial knowledge positively affects consumer credit card ownership and desirable financial behaviors of credit card use, and is negatively related to undesirable credit card behaviors. The results are robust to different regression methods and after removing income outliers. The heterogeneity test shows that financial knowledge cannot enhance desirable credit card behaviors because of the income limitations in the low-income group. Therefore, there are implications for policymakers, financial sectors, and consumers to improve consumers' usage of credit cards and cultivate proper consumption habits by enhancing consumer financial knowledge.