The Effects of Perceived and Actual Financial Knowledge on Credit Card Behavior

Sam Allgood and William B. Walstad

No 2011-WP-15, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: This study uses a combined measure of financial literacy or financial knowledge that includes both a test score of actual financial knowledge and a self-assessment of overall financial knowledge. The combined measure provides greater understanding about how financial knowledge affects financial behavior. The study uses a large national survey of U.S. adults and households (n=28,146) to investigate how financial knowledge affects typical behaviors related to credit card use. The five behaviors include paying credit card balances on time, carrying over a balance and paying interest on it, making only a minimum payment on a credit card, being charged a late fee, and going over a credit card limit. The results from the probit analysis show that actual financial knowledge and perceived financial knowledge both significantly influence credit card behavior.

Keywords: financial knowledge; financial literacy; credit card behavior (search for similar items in EconPapers)
JEL-codes: D12 D14 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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