TIMING IS MONEY: DOES LUMP‐SUM PAYMENT OF THE EARNED INCOME TAX CREDIT AFFECT SAVINGS AND DEBT?

Earned income tax credit (EITC) benefit income is paid out in a lump‐sum around tax time. We investigate whether savings and debt among EITC‐eligible families reflect the timing of payments. Using nationally representative, individual‐level data on self‐reported debt and savings outcomes, we search for differences in monthly behavior between EITC‐eligible and ‐ineligible households. We find evidence that credit card and unsecured debt holding among EITC‐eligible families reflects the timing of the EITC, with low debt levels at tax time relative to other months. Debt holding among ineligible families with children does not exhibit a similar pattern. We find limited evidence of intrayear patterns in savings behavior among EITC‐eligible families. (JEL D14, I38, H23)     

Credit Card Debt and the Provision of Financial Support to Kin in the US

Credit card debt stands at over $1 trillion in the US and grows continuously. Scholars have argued that high (and growing) levels of credit card debt are attributable in part to rising economic vulnerabilities, combined with a thinning public safety net, credit cards being increasingly employed to make ends meet in this context. This paper extends this line of work by stressing that individuals and households do not rely on their credit cards only to mitigate their own financial hardships, but also those experienced by their non-coresidential kin members. More specifically, building on the notion that kin networks can constitute a source of negative social capital, we argue that individuals often accumulate credit card debt as they attempt to provide monetary assistance to their relatives in need. We also show that this effect is particularly strong in lower-income groups and in African American communities, in which need levels are especially high. Based on random and fixed effects analyses of data from the Panel Study of Income Dynamics, these insights extend scholarship on both kin networks of support and the sources of credit card debt.

     

Demographics, attitude, personality and credit card features correlate with credit card debt: A view from China

With the help of a commercial bank in China, we studied consumer credit card debt behavior² in correlation with demographics, attitude, personality, and credit card features factors. The study was conducted by using mail-in questionnaires, which were sent to credit card holders who was using or had used either revolving credit or petty installment plans. According to regression functions, we found that demographic variables and credit card features had limited explanatory power compared to attitude variables and personality variables. Specifically, we found that revolving credit use and petty installment use were closely related to attitudes about credit cards, money and debt. Risk attitude efficiently predicted petty installment use; however, it did not correlate with revolving credit use. Personality factors of self-control, self-esteem, self-efficacy, deferring gratification, internal locus of control and impulsiveness were significantly correlated with revolving credit use; on the other hand, sensation seeking, impulsiveness, and deferring gratification were correlated with petty installment use. We also found that some credit card features easily led to an “illusion of income” that facilitated consumer credit card debt behavior.     

College Students and Credit Card Use: The Role of Parents, Work Experience, Financial Knowledge, and Credit Card Attitudes

This study examined the influence of parental interactions, years of work experience, financial knowledge, credit card attitudes, and personal characteristics on college students’ credit card behaviors (i.e., number of cards and amount of debt). Based on data collected across seven universities (N = 413), we found that students who had parents who argued about finances, were juniors/seniors, and were comfortable making minimum payments were the most likely to have $500 or more in credit card debt and two or more credit cards. In addition, number of credit cards held was the only dependent variable influenced by gender and fear of credit cards. These results highlight the importance of early interventions in the life of college students including involving parents as positive role models.     

Age, debt and anxiety

What is the association between debt and anxiety? Is the relationship between age and anxiety in part due to financial debt? Recently there has been a renewed interest for the reconceptualization and measurement of socioeconomic status that moves beyond the standard education, occupation, and income. This paper uses credit card debt and stress regarding debt to examine the relationship among age, debt, and anxiety. Using data from a 1997 representative sample of more than 1,000 adults in Ohio, results show that anxiety does increase with the ratio of credit card debt to income, and with being in default; but credit card debt accounts for little of the age-anxiety association. Stress regarding overall debt does explain some of the age effect. In addition, stress also explains some of the effect of the credit card debt to income ratio, and all of the effect of default on anxiety.     

Parental transfer of financial knowledge and later credit outcomes among low- and moderate-income homeowners

It is well established that acquiring financial skills during childhood is linked with better savings in adulthood. Little is known, however, about the relationship between parental teaching of money management early in life and children's financial outcomes in adulthood. This is particularly true for low- and moderate-income (LMI) households. Using data from Community Advantage Program survey data for 2,389 LMI homeowners, we find that adults who report receiving high levels of money-management teaching in childhood from their parents are associated with higher credit scores and lower credit card debt in adulthood. We also find that the level of parental financial teaching influences the relationship between children's later educational attainment and credit scores. These findings suggest implications for initiatives promoting financial capability for parents and children.     

NEW EVIDENCE ON CREDIT CARD BORROWING AND REPAYMENT PATTERNS

A new dataset allows researchers to examine patterns of credit card use for both borrowing and payoff. This article addresses changes in these behaviors for different birth cohorts by estimating cohort‐adjusted age profiles for debt and payoff rates based on a time series of cross sections. Younger consumers are found to be borrowing more heavily and repaying at lower rates than older generations. The accumulation of credit card debt is found to continue over the lifecycle. This has implications for recent changes in laws governing the credit card industry. Increases in minimum required payment rates are examined and are found to increase actual payoff rates more than proportionately. (JEL D12)     

Effects of Family Life-Cycle Stages on Consumer Debts

Using the 1998 Survey of Consumer Finances (SCF), this study examined factors related to two types of consumer debt: installment debt and credit card debt. To address the limitations of the conventional life-cycle hypothesis, the study incorporated ability, willingness, and need to borrow, and prudence as well as life-cycle stages in the conceptual framework. The results of the double-hurdle model showed that life-cycle stages, willingness and ability to borrow, prudence, and the need to borrow were significant factors affecting installment debt and credit card debt. Based on the results, implications for financial counselors and educators, lenders, consumers, and policy makers are discussed.     

RISING TOP INCOMES AND INCREASED BORROWING IN THE REST OF THE DISTRIBUTION

One potential consequence of rising top‐income concentration is borrowing by less‐affluent households attempting to maintain relative living standards. This paper evaluates the “keeping up with the Joneses” phenomenon, examining the responsiveness of payment‐to‐income ratios for different debt types across the income distribution to changes in income among affluent households. The analysis provides evidence for the responsiveness of debt to rising top incomes. Middle‐ and upper‐middle‐income households take on more housing‐related debt and have higher payments in places with higher top‐income levels. Among lower‐income households non‐mortgage borrowing and debt payments decline, consistent with restrictions in the supply of credit. (JEL D63, D14)     

Correlates of Credit Card Adoption in Urban China

Analysis of data from the 2008 Survey of Chinese Consumer Finance and Investor Education indicated that 30.0?% of the sample households held at least one credit card. Significant factors associated with the probability that an urban Chinese individual would hold a credit card included income, age, education, occupation, and awareness of credit card risks, default consequences, the credit system, and that late payments increase interest.     

Do single mothers in the United States use the Earned Income Tax Credit to reduce unsecured debt?

The Earned Income Tax Credit (EITC) is a refundable credit for low-income workers mainly targeted at families with children. This study uses the Survey of Income and Program Participation’s topical modules on Assets and Liabilities to examine associations between the EITC expansions during the early 1990s and the unsecured debt of the households of single mothers. We use two difference-in-differences comparisons over the study period 1988–1999, first comparing single mothers to single childless women, and then comparing single mothers with two or more children to single mothers with exactly one child. In both cases we find that the EITC expansions are associated with a relative decline in the unsecured debt of affected households of single mothers. While not direct evidence of a causal relationship, this is suggestive evidence that single mothers may have used part of their EITC to limit the growth of their unsecured debt during this period.     

Imagined interactions,family money management patterns and coalitions,and attitudes toward money and credit

This study explores the imagined interactions college students have with their parents about money and credit, their attitudes toward credit and money, the ways they say their parents deal with financial decisions, and the communication coalitions regarding finances they perceive existing within their family. Students’ imagined interaction pleasantness is greatest when parents jointly form a plan for paying off credit card debt and lowest when parents argue. When family coalitions exist, students report more frequent imagined interactions. Imagined interaction frequency and pleasantness are related to credit and money attitudes.

Credit Card Ownership Among American High School Seniors: 1997–2008

The purpose of this study is to investigate the rise in credit card ownership rates among high school seniors in the United States. It uses the Jump$tart Coalition’s cross-sectional surveys from 1997 to 2008 to analyze the determinants of credit card ownership among high school seniors. These results show that students with credit cards are less financially literate than students without credit cards; and students with credit cards in their own names are almost twice as likely to work during the school year for money. These findings help make a case for improved financial education and training, and institutional changes that limit the pervasive issuance of credit cards to high school students.     

Brothers are doing it for themselves?: Men's experiences of getting into and getting out of debt

Research on debt and gender has typically had an individual focus. In research on households, and the distribution of income within them, studies have typically focussed on women. When it comes to over-indebtedness, women are also more likely than men to seek debt advice. This article reports on a UK study of men and over-indebtedness that focused on the dynamics of couple relationships. The research used in-depth interviews with menin partnerships and living alone after family breakdown to explore how gender relations and gendered identities figure in men's acquisition and management of problematic personal debt, including their orientation towards and experiences of debt advice. It was undertaken when a period of readily available credit and soaring levels of borrowing had been followed by the ‘credit crunch’, when recession had left many families struggling with problematic debt and when debt advice services were coping with increasing levels of demand. In this context, there were some signs that the effects of the recession were leading men to seek debt advice more than had been the case in the past. Findings illustrate the dynamics of male control of household expenditure and the acquisition of problematic debt. They also suggest that when men have sole responsibility for managing incomes constrained by over-indebtedness, they experience the anxiety and depression more typically reported by women; but ‘male pride’ in relation to financial matters that forms a significant component of their identities acts as a barrier to seeking advice.     

"Let us help them to raise their children into good citizens": the Lone-Parent Families Act and the wages of care-giving in Israel

Based on the assumption that the construction of meaning in the process of policy-making is crucial if we wish to understand the gender outcomes of social policy, this article analyzes the parliamentary debates that preceded and accompanied the legislation of the Israeli Mono-Parental Families Act, 1992. It focuses on the enunciation of gender roles and relations in the discourses that framed and justified the Act as well as on how the capacity to establish and maintain autonomous households was constructed and legitimized. Two sets of discourses emerged during the deliberations over the Act, each of which endeavored to interpret the needs, identities, and capacities for action among lone-parent families. The article shows how a specific version of the capacity to establish and maintain autonomous households—that of caregivers who happen to be workers—was privileged in the policy paradigm underlying the Act. The alternative vision—that of workers with caregiving responsibilities—was marginalized and eventually disregarded in the final wording and implementation of the Act. The article concludes with an analysis of the socio-political processes that underlie the prioritization of the version, which was ultimately expressed in the implementation of the Act. It is suggested that a state-level collective identity project shaped by demographic concerns and geo-political factors and changes in the political economy combined to define the needs, identities, and capacities for action of lone-parent families in terms of a model of motherhood in which care-giving trumped paid work.     

Consumers’ credit card repayment decisions: The role of higher anchors and future repayment concern

We investigated two aspects of credit card repayment decisions: the extent to which the anchoring effect of minimum repayment information may be mitigated by information on alternative anchors, specifically repayments that would repay the balance in two years (Study 1) or nine months (Study 2); and the role of future repayment concern. In two experiments, three realistic credit card statements were presented with different outstanding balances. Participants, who were randomly allocated to one of four information conditions depending on supplementary information provided on the statements, stated how much they would repay that month. They were then asked about concerns they would have about repayment difficulties if they had a fixed consumer loan over three years. In Study 1 the alternative two-year repayment anchor had a negative effect on percent repayment, whereas in Study 2 the nine-month repayment anchor had a significant positive effect, especially for those with higher future repayment concern. Also, in both studies, future repayment concern had a direct inverse effect on repayment decisions which partially mediated the effect of disposable income. It is concluded that the addition to credit card statements of a table of cost and duration information for a range of repayment amounts may usefully support repayment decisions.     

Predictors of Holding Consumer and Mortgage Debt among Older Americans

Using data from the 2000 Health and Retirement Study (HRS), this study examined the probability of older Americans holding consumer and mortgage debt. The specific objectives of this study were to identify to what extent individuals aged 65 and over hold consumer or mortgage debt and to investigate factors that influence the probability of holding consumer or mortgage debt in old age. The results of logistic regression analysis indicated that older individuals who had larger households, had higher levels of education, were aged 65–74, were married, were Black, and were employed, were more likely to hold consumer or mortgage debt. This study concluded that holding one kind of debt is associated with probability of holding another kind of debt.     

High-risk health and credit behavior among 18- to 25-year-old college students

The number of students accumulating credit card debt--and the amount of debt itself--on college campuses is increasing. If high-risk credit and health behavior are associated, health behavior interventions might apply to high-risk credit behavior. OBJECTIVE: The authors' purpose was to examine these possible associations. PARTICIPANTS AND METHODS: They used a retrospective design with existing data from a sample of 45,213 US college students and several ordinal regression models, which corresponded with high priority college health issues. RESULTS: Students with high-risk credit behavior were more likely to have driven after drinking, used amphetamines in the previous 30 days, felt functionally impaired by depression in the previous 12 months, had a higher body mass index (BMI), or had a lower grade-point average (GPA). They were less likely to have participated in vigorous physical activity, used condoms for oral or vaginal sex in the prior 30 days, or used marijuana. The findings support the notion that high-risk health and credit behaviors are associated. CONCLUSIONS: Further research could clarify the nature of this relation.     

Financial Knowledge and Credit Card Behavior of College Students

This study examined the relationship between financial knowledge and credit card behavior of college students. The widespread availability of credit cards has raised concerns over how college students might use those cards given the negative consequences (both immediate and long-term) associated with credit abuse and mismanagement. Using a sample of 1,354 students from a major southeastern university, results suggest that financial knowledge is a significant factor in the credit card decisions of college students. Students with higher scores on a measure of personal financial knowledge are more likely to engage in more responsible credit card use. Specific behaviors chosen have been associated with greater costs of borrowing and adverse economic consequences in the past.