Credit Card Behavior Research Articles

Financial knowledge and responsible credit card behavior: exploring mediators and moderators

PurposeUnder the background of low consumer financial knowledge and accumulated credit card liabilities, this study investigates the relationship between financial knowledge and responsible credit card behavior using data from the 2019 China Household Finance Survey (CHFS). From the perspective of consumer economic well-being, this study defines accruing credit card debt to buy houses and cars when loans with lower interest rates are available as irresponsible credit card behavior.Design/methodology/approachThis study uses probit regressions to examine the association between financial knowledge and responsible credit card behavior because the dependent variable is a dummy variable. To alleviate endogeneity problems, this study uses instrument variables and Heckman’s two-step estimation. Furthermore, to explore the potential mediators in this process, this study follows the stepwise regression method. Finally, this study introduces interaction terms to examine whether this association differs in different groups.FindingsThe results indicate that financial knowledge is conducive to increasing the probability of responsible credit card behavior. Mediating analyses reveal that the roles of financial knowledge occur by increasing the degree of concern for financial and economic information and the propensity to plan. Moderating analyses show that the effects of financial knowledge on responsible credit card behavior are stronger among risk-averse consumers and in regions with favorable digital access.Originality/valueThis study measures responsible credit card behavior from the perspective of the consumer’s well-being, which enriches practical implications for consumer finance. Furthermore, this study explores the potential mediators influencing the process of financial knowledge that affects responsible credit card behavior and identifies moderators to conduct heterogeneous analyses, which helps comprehensively understand the nexus between financial knowledge and credit card behavior. By achieving these contributions, this study helps to curb the adverse effects of irresponsible credit card behavior on consumers’ well-being and the economic system and helps policymakers promote financial knowledge to fully prevent irresponsible credit card behavior.

How are veterans faring financially? Updates and new evidence from a national survey

This research provides new and updated evidence on the financial capability of military veterans. We leverage data from two waves of the FINRA Investor Education Foundation’s National Financial Capability Study (NFCS) to examine how veterans are faring over time, relative to comparable civilians. Overall, veterans in 2018 fared better than non-veterans in several areas. They reported higher financial satisfaction, less difficulty covering expenses, and a higher likelihood of having an emergency fund and non-retirement investment account. However, veterans were more likely to report having experienced a large drop in income, problematic credit card behaviors and late mortgage payments. Notably, though several indicators of overall financial well-being and saving behaviors improved from 2015 to 2018 and spending and credit outcomes worsened, these relative changes did not differ between veterans and non-veterans.

Financial literacy, self-control, self-esteem, and credit card utilization

This study combines one personal financial management concept, money-related literacy, and psychological ideas, i.e., self-control and self-esteem, in one model to be statistically associated with credit card behavior by utilizing gender as the control variable. Therefore, this study investigates and analyses the effect of financial literacy, self-control, and self-esteem on credit card usage. Furthermore, this study employs 120 bank employees as samples, taken by a snowball sampling technique. Besides, this study surveys their perspective based on the close-ended questions in the questionnaire. After obtaining their responses, their validity and reliability are verified. Also, the goodness-of-fit model is detected. After the model fits the data, the structural equation model based on covariance is utilized to examine the causal relationship declared in the proposed hypotheses. After checking them, this study concludes that financial literacy, self-control, and self-esteem successfully create credit card utilization. Employees with strong financial literacy, self-control, and self-esteem are responsible for owning credit cards because they tend to use them less and pay their bills on time. Females have a positive propensity for credit card utilization to achieve their identity and emotional status. As an implication, the study recommends females instantly convert their transactions into installments and pay the bill in the maximum and minimum ranges to avoid a decrease in credit scores. Besides, internal and external marketing is needed to attract female employees working at similar banks or other banks that cannot issue credit cards.

A Bibliometric Review ofJournal of Financial Counseling and PlanningBetween 1990 and 2022

In 1990, the Journal of Financial Counseling and Planning (JFCP) was established. The journal publishes academic research on consumer financial decision-making, financial education, counseling, and planning. This article reviews the journal’s contents published during the period 1990–2022. It analyzes JFCP’s publication trends, citation statistics, significant themes, authors’ collaborations, keywords, and contributions to the literature of consumer finance. Most studies employed Life Cycle Hypothesis and Expected Utility Theory. JFCP publishes mostly US-based quantitative empirical studies. JFCP’s eight knowledge themes are credit card behavior; financial literacy and financial behavior; financial risk tolerance; financial education, and financial behavior; financial distress and financial self-efficacy; financial well-being; workplace financial education and financial help-seeking behavior, and JFCP’s retrospection. Among JFCP’s articles, the most used keywords selected by authors are “survey of consumer finances” and “financial literacy.” This study also describes the author, country, and concept networks.

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

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.

Does mobile payment use lead to overspending? The moderating role of financial knowledge

Although consumers have increasingly adopted mobile payments as a new payment method, little academic attention has been given to the consequences of mobile payment use and whether the relationship may vary by individual factors. The purpose of this study was to investigate whether and how mobile payment use influences financial behaviors, particularly overspending behaviors. This study focuses on three aspects of overspending behaviors: consumption, money management, and credit card behaviors. Using a consumer sample (N = 21,457) from the 2018 National Financial Capability Study (NFCS), our results showed that mobile payment users are at a much higher risk of overspending than non-users. We further examined the moderating role of financial knowledge in the relationship and found that having more financial knowledge helps buffer the extent to which mobile payments exacerbate overconsumption and difficulty with money management. The findings contribute to the mobile payment literature by empirically examining the consequences of adopting a new payment method. The findings have practical implications for service providers in the mobile payment industry on how to design and develop interventions to reduce the unfavorable effects of mobile payment use among consumers.

Multidimensional credit attitude and credit card debt behavior in the United States

PurposeThe purpose of this study is to construct composite index variables of credit attitude using six attitudinal variables. This study also examines the relationship between consumer credit attitude and credit card debt behaviors.Design/methodology/approachThis study used the pooled dataset of the 2010 and 2013 Survey of Consumer Finances (SCF) released by the Federal Reserve Board. A total of 8,417 households were used as our analytic sample. The credit card indices were constructed using factor analysis with polychoric correlations. Factors of the credit card debt behaviors were estimated using hierarchical logistic regression models.FindingsThe results of factor analysis identified two credit attitude indices (wants and needs). The results of hierarchical logistic regression analyses show that the credit attitude indices have a positive influence on payment behaviors; households with more favorable attitudes about credit use for non-necessities (wants) were more likely to hold an outstanding credit card balance, have irregular payment practice and pay a revolving charge.Originality/valueAlthough there is ample documentation in the literature of credit behavior, the current literature is deficient in some areas for not addressing unobserved consumer attitudinal dispositions. Further, the separate treatment of selected survey items or an additive scale of survey items has been widely used; however, this approach cannot capture multidimensional characteristics among attitudinal items if credit attitude is not necessarily unidimensional. In response to the shortfall in the extant literature on credit card behavior, this study examined multidimensional aspects of credit attitude as a determinant of credit card debt behavior through methodological justification. Implications for future research and practitioners are provided.

How Does Mobile Payment Technology Affect Consumer Payment Behavior?

In recent years, mobile payment technology has been enjoying a rising popularity among consumers. While the innovation provides flexibility and convenience, it could also facilitate consumers' substitution of currency and checks by cards. Furthermore, the technology could affect consumers' credit card behavior. Understanding these possible effects of payment innovation is important for maintaining a healthy financial system and consumers' well-being. This project investigates the effect of mobile payment technology on consumer payment behavior in the context of consumers' choice of point-of-sale (POS) instruments and its implications for credit card behavior. Using a unique panel of U.S. consumers from 2015 to 2018, I find that mobile payment technology is positively associated with credit card use while being negatively associated with cash and check use. In addition to higher credit card usage, the adoption of mobile payment technology is associated with credit card revolving behavior. Applying the heteroskedasticity-based instrumental variable-generalized method of moments approach (IV-GMM), I find arguably causal evidence that mobile payment technology leads to a higher probability of using revolving credit as well as higher revolving balances.

Measuring Financial Wellbeing with Self-Reported and Bank-Record Data

This study develops multi-item scales of the financial wellbeing of customers of a major Australian bank using self-reported survey data that are matched with the customers' financial records. Using Item Response Theory (IRT) models, the study develops: First a Reported Financial Wellbeing Scale that is formed from responses to 10 questions about people's experiences and perceptions of financial outcomes, and second an Observed Financial Wellbeing Scale that is formed from five financial-record measures of customers' account balances, net spending, and payment problems. The IRT models show that each scale reliably differentiates between a wide range of outcomes and that the components within each scale have similar power to discriminate. We validate the scales by estimating Least Absolute Shrinkage and Selection Operator machine-learning models of how they correlate with other measurable characteristics. Savings habits, spending habits, credit card behavior, household income, education, difficulties with housing payments, and the use of and access to social or government support are each associated with both types of financial wellbeing.

How are Veterans Faring Financially? Updates and New Evidence from a National Survey

This research provides updated and new evidence on the financial well-being of military veterans. We leverage data from two waves of the FINRA Investor Education Foundation’s National Financial Capability Study (NFCS) to examine how veterans are faring over time, relative to comparable civilians, and among different demographic subgroups. Overall, veterans in 2018 are faring better than those in 2015 in a number of areas. They have less difficulty covering expenses and bills, lower likelihoods of experiencing an income drop, and higher likelihoods of having emergency funds and retirement plans in addition to an employer plan. Veterans in 2018 are, however, more likely to report problematic credit card behaviors. Relative to non-veterans, veterans continue to fare better in many areas. They report higher financial well-being, lower levels of financial anxiety, and a higher likelihood of having a will. They are also more likely to participate in the gig economy. Veterans who are female; who are younger; who are married, divorced or separated; or who have financial dependents are faring worse than their veteran peers. Further, black veterans are faring somewhat better than white veterans, while those identifying as an “Other” race/ethnicity are faring worse.

Financial Knowledge, Confidence, Credit Use, and Financial Satisfaction

This article investigates associations between confidence about financial knowledge and two outcome variables, financial behaviors and financial satisfaction. On one hand, subjective financial knowledge (confidence) is necessary to make proactive decisions, yet overconfidence has been associated with a range of negative financial behaviors and outcomes. Both types of objective and subjective knowledge may be related to critical financial behaviors and choices such as credit card usage which in turn may be associated with financial satisfaction, an important component of consumer well-being. This article analyzes data from the 2015 National Financial Capability Study to examine how financial knowledge confidence relates to credit card behaviors and financial satisfaction. We use mediation and floodlight analyses to uncover relevant relationships between variables of interest. We find evidence that confidence is associated with healthy credit card use that contributes to financial satisfaction. We also observe strong interactions with knowledge to find that confidence is more strongly associated with credit card use and overall financial satisfaction as knowledge increases. Findings from this study can help financial educators and advisors to deliver the right mix of financial knowledge to better financial choices and behaviors.

CREDIT CARD ADOPTION AND USAGE IN CHINA: URBAN–RURAL COMPARISONS

This study examines the differences in credit card behaviors between rural and urban households in China. Using data from a national survey of Chinese households, results show distinct differences between rural and urban respondents in credit card adoption and usage even after controlling for relevant demographic, financial, attitude, and expectation variables. Rural households are less likely to possess a credit card, possibly due to supply side limitations such as lack of financial institutions and low rate of credit card acceptance in rural areas. No urban–rural difference is found in credit card payment behavior. Implications for policymakers and credit card issuers are discussed.

Tapping and waving to debt: Mobile payments and credit card behavior

This study investigates whether the use of mobile payment technology is associated with individuals’ credit card (mis-)behavior. Using a sample of more than 25,000 US households, we find that individuals using their smartphones to conduct mobile payments are more likely to exhibit costly credit card behavior. In addition, conditional on using mobile payments, our results provide further evidence that frequent usage of mobile payments is related to individuals’ costly credit card behavior. Thus, our findings suggest a relationship between innovative payment methods and increases in individuals’ overall spending.

The Relationship Between Working Youth Characteristics and Financial Capability

There is a widespread interest in raising the levels of financial capability due to the soaring of indebtness among youth in both developed and developing countries. The issue is even more critical among working youth due to their early career life financial commitments. Thus this paper aims to shed light on the level of financial capability among working youth and the relationships between working youth characteristics and financial capability. A questionnaire survey was disseminated to 500 Malaysian working youth between 18 to 40 years old. Based on the 200 completed responses the study reveals that there is an adequate level of financial capability among respondents. Marital status, age, level of income, employment status, living arrangement, number of credit card and financial behavior are found to have significant relationships with financial capability. A further test shows that youth financial literacy and saving behavior have significant effects on financial capability. This study contributes new empirical evidence on financial capability and its association with working youth characteristics. As such this study provides some interesting clues to financial capability among working youth.

Tapping and Waving to Debt: Mobile Payments and Credit Card Behavior

This study investigates whether the use of mobile payment technology is associated with individuals’ credit card (mis-)behavior. Using a sample of more than 25,000 US households, we find that individuals using their smartphones to conduct mobile payments are more likely to exhibit costly credit card behavior. In addition, conditional on using mobile payments, our results provide some evidence that the frequency of mobile payment usage further increases individuals’ likelihood to exhibit costly credit card behavior. Our findings suggest that innovative payment methods may come at the cost of increases in individuals’ overall spending with adverse effects for the US economy.

Financial Sophistication and Credit Card Behaviors Revision

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.

Comparing Military and Civilian Household Finances: Descriptive Evidence from Recent Surveys

Despite significant media and policy attention to the financial conditions of military and civilian households in American over the past few years, little is known about their relative standing and decision making. Using data from large national surveys, this analysis provides descriptive evidence on key differences for comparable young, low‐moderate income and education military and civilian respondents. I find that military members have more types of savings accounts, more problematic credit card behaviors, and equivalent use of alternative financial services. I briefly discuss directions for future research and some policy implications.

Does knowing overcome wanting? The impact of consumer knowledge and materialism upon credit card selection with young consumers

Purpose – This paper investigates the determinants of credit card use and misuse by student and young professionals. Critical to the research is the impact of materialism and knowledge on selection of the appropriate credit card. Design/methodology/approach – This study uses survey research and partial least squares to investigate credit card behaviors of students versus young professionals. Findings – In a comparative study of young professionals and students, it was found that consumer knowledge, as expected, leads to better consumer selection of credit cards. Materialism was also found to increase the motivation for more optimal consumer outcomes. For more experienced consumers, such as young professionals, it was found that despite them being more knowledgeable, they were more likely to select a credit card based on impulse. Originality/value – This paper examines how materialism may in fact encourage some consumers to make better decisions because they are more motivated to develop better knowledge. It also shows how better credit card selection may inhibit impulse purchasing.

Adoption of Mobile Payment Technology by Consumers

This study examined the use of mobile payments by American consumers. Using a sample of 15,060 respondents from all 50 states and the District of Columbia, a profile of mobile payment users was developed. Respondents who were using mobile payments were more likely to be younger, male, minorities, and to have a higher than average income. Results indicated that there were strong associations between mobile payment adoption and high cost debt (payday loans, auto‐title loans, etc.), trouble with financial management (making ends meet), and credit card behavior (taking cash advances and paying over the limit fees). Results suggest that users of mobile payment technology were focused on convenience, and they might be prone to impulse spending. The potential impact of the increasing adoption of this technology is discussed.

Credit card behavior, financial styles, and heuristics

The paper makes four contributions. First, the paper provides new data and findings about credit card usage segmentation in respect to spending and borrowing behavior. Second, it sets the new findings against the backdrop of the newly emerging literature on financial literacy. A great variability occurs in financial literacy across American consumers. Third, the paper describes fast and frugal heuristics aimed to help consumers make effective, and in some cases better, budgeting decisions when they use credit cards. Fourth, the paper describes the introduction of a new set of online financial tools, offered by a large credit card company, which consumers are now using to make decisions about their spending and borrowing, and links these tools to the heuristics under discussion. Fast and frugal heuristics are likely to be especially valuable to consumers with low confidence in their online skills. Notably, 25% of credit cardholders report that they have low confidence using online technology to manage their finances, with the corresponding figure being 44% for those most at risk.