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The Able Worry More? Debt Delinquency, Financial Capability, and Financial Stress

Jing Jian Xiao () and Kyoung Tae Kim ()
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Jing Jian Xiao: University of Rhode Island
Kyoung Tae Kim: University of Alabama

Journal of Family and Economic Issues, 2022, vol. 43, issue 1, No 9, 138-152

Abstract: Abstract Research on the link between debt and financial stress is emerging. This study was one of the first attempts to examine the association between debt delinquency and financial stress and the moderating role of financial capability in the association. Delinquencies in three types of debts were examined: (a) mortgage, (b) credit card, and (c) student loan. With data from the 2018 U.S. National Financial Capability Study, multivariate regression results showed that payment delinquencies of mortgage, credit card and student loans were positively, while financial capability was negatively associated with financial stress. Further, surprisingly, the results implied that among consumers with debt delinquencies, financial capability may increase financial stress. If both financial capability’s direct and interactive effect were considered, financial capability may decrease financial stress at much smaller rates than those without debt delinquencies. The situation was the worst among consumers with multiple delinquencies, in which the potential net effect of financial capability on financial stress was positive. The results of this study have implications for consumer financial service practices.

Keywords: Debt delinquency; Financial stress; Financial capability; National Financial Capability Study (search for similar items in EconPapers)
JEL-codes: G51 G53 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10834-021-09767-3

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