Psychological factors in consumer debt: Money management, economic socialization, and credit use

A postal survey study of factors correlated with consumer debt investigated several psychological variables which have been suggested as causes or effects of debt. The survey was conducted with the help of a public utility company, and questionnaires were sent to three groups with different debt histories over the preceding two years: Non-Debtors (no debt to the company), Mild Debtors (late payment to the company), and Serious Debtors (sued for debt recovery by the company). Economic and demographic factors predicted debt category well, supporting previous results. Further variance between groups was accounted for by people's money management skills and facilities, by measures of their time horizons, and by aspects of their consumer behaviour. Non-debtors had more money management facilities (e.g. bank accounts) than debtors, and rated their abilities at money management more highly. Debtors had shorter time horizons than non-debtors. Debtors were more likely to buy cigarettes and Christmas presents for children than non-debtors. No group differences were found for attitudes to debt or locus of control. There were significant group differences for measures of economic socialization, social comparisons, use of credit, and other aspects of consumer behaviour, but these differences were not independently significant on multivariate analysis. Conclusions must be qualified because of low return rates, but the results suggest that a complex of psychological and behavioural variables affect debt and are affected by it. It is argued that these variables are linked to the psychology of poverty.