Arbeitspapier

Debt literacy, financial experiences, and overindebtedness

We analyze a national sample of Americans with respect to their debt literacy, financial experiences, and their judgments about the extent of their indebtedness. Debt literacy is measured by questions testing knowledge of fundamental concepts related to debt and by selfassessed financial knowledge. Financial experiences are the participants' reported experiences with traditional borrowing, alternative borrowing, and investing activities. Overindebtedness is a self-reported measure. Overall, we find that debt literacy is low: only about one-third of the population seems to comprehend interest compounding or the workings of credit cards. Even after controlling for demographics, we find a strong relationship between debt literacy and both financial experiences and debt loads. Specifically, individuals with lower levels of debt literacy tend to transact in high-cost manners, incurring higher fees and using high-cost borrowing. In applying our results to credit cards, we estimate that as much as one-third of the charges and fees paid by less knowledgeable individuals can be attributed to ignorance. The less knowledgeable also report that their debt loads are excessive or that they are unable to judge their debt position.

Sprache
Englisch

Erschienen in
Series: CFS Working Paper ; No. 2009/08

Klassifikation
Wirtschaft
Household Saving; Personal Finance
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Thema
Financial Literacy
Numeracy
Debt Loads
Credit Card Borrowing
Private Verschuldung
Bewertung
Bildungsniveau
Lernprozess
Kreditkarte
Befragung
USA

Ereignis
Geistige Schöpfung
(wer)
Lusardi, Annamaria
Tufano, Peter
Ereignis
Veröffentlichung
(wer)
Goethe University Frankfurt, Center for Financial Studies (CFS)
(wo)
Frankfurt a. M.
(wann)
2009

Handle
URN
urn:nbn:de:hebis:30-63796
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Lusardi, Annamaria
  • Tufano, Peter
  • Goethe University Frankfurt, Center for Financial Studies (CFS)

Entstanden

  • 2009

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