The Credit Card Debt Puzzle and Noncognitive Ability*

Wealth accumulation and the propensity to plan

Hwan-sik Choi and Ron A Laschever

Review of Finance, 2018, vol. 22, issue 6, 2109-2137

Abstract: Many households concurrently hold low-yield liquid assets while incurring costly credit card debt. In our sample, more than 80% of households with credit card debt also have low-yield liquid assets. Using data from the Health and Retirement Study (N = 30,517), we examine the role of noncognitive skills as well as the economic, financial, and demographic factors that affect the likelihood of co-holding. We find that the “Big Five” personality traits have a statistically significant and economically important effect: households with a more agreeable, introvert, and less conscientious head of household are more likely to co-hold. We also examine the role of intra-household dynamics.

Keywords: Personality; Household finance; Liquidity; Self-Control; Intra-household dynamics; Financial literacy (search for similar items in EconPapers)
JEL-codes: D03 D1 D12 D14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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