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Knowing what not to do: Financial literacy and consumer credit choices

Christian Dick and Lena Jaroszek

No 13-027, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Based on a rich panel of household data, we investigate the determinants of the use of consumer credit in Germany. We find that the usage frequency of an easily accessible, but relatively expensive source of consumer credit decreases with financial literacy but is unrelated to household income. This result is robust to household structure, age, formal education, and occupational status. Based on childhood-related information on spending behavior, we control for the influence of self- control on credit decisions. We document that neither self-control, nor low numeracy drive out financial literacy when explaining the frequency of (expensive) credit usage. Hence, financial education plays an important role to improve consumer choices.

Keywords: Consumer finance; credit decisions; financial literacy; financial education; numeracy; self-control (search for similar items in EconPapers)
JEL-codes: D12 D14 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-pke
References: Add references at CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Knowing What Not To Do: Financial Literacy and Consumer Credit Choices (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:13027

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