The impact of wealth on financial mistakes: Evidence from credit card non-payment

Barry Scholnick, Nadia Massoud and Anthony Saunders

Journal of Financial Stability, 2013, vol. 9, issue 1, 26-37

Abstract: Recent research finds that poorer individuals make financial mistakes when the decisions are difficult and rare. We examine who makes financial mistakes involving decisions that are easier and more frequent – specifically, the inadvertent failure to pay monthly credit card balances when sufficient funds are available. On the one hand poorer individuals may make such mistakes because of lower levels of financial literacy. Alternatively, richer individuals may make such mistakes because of the relatively lower costs to them of such mistakes. We examine this question using confidential individual credit card statement data, with over a million data points. Our results show that poorer individuals are more likely to make these mistakes, even after controlling for education.

Keywords: Credit cards; Financial mistakes; Penalty fees; Late fees; Over-limit fees; Cash advances (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:9:y:2013:i:1:p:26-37

DOI: 10.1016/j.jfs.2012.11.005

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