When Your Word Is Not Enough: Race, Collateral, and Household Credit

Martha Olney

The Journal of Economic History, 1998, vol. 58, issue 2, 408-431

Abstract: Black families included in the 1918/19 BLS Consumer Purchases Survey used installment credit more frequently and merchant credit less frequently than White families. Economic and demographic characteristics explain the racial difference for installment but not for merchant credit. I argue greater demand for installment credit by Black families was satisfied because repossession of collateral upon buyer default overcame merchants' personal prejudice with regard to creditworthiness, but absence of tangible collateral impacted the availability of merchant credit. Low use of merchant credit can account for relatively high interwar saving rates for low-income Black families.

Date: 1998
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