Knowing What Not To Do: Financial Literacy and Consumer Credit Choices

Lena Jaroszek and Christian Dick

VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy from Verein für Socialpolitik / German Economic Association

Abstract: We analyze whether the frequent use of credit lines is rational or influenced by behavioral traits of households. We consider the special case of Germany where credit lines on current accounts are available to 80% of the population. We document that the excessive usage of costly credit lines is more likely for people who give intuitive but incorrect answers in the Cognitive Reflection Test. Our analysis of a rich sample of household data also provides evidence that a higher level of financial literacy can help to improve consumer credit choices.

JEL-codes: D12 D14 I20 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-neu
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc14:100383

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