Debt Begets Debt: Examining Negative Credit Card Behaviors and Other Forms of Consumer Debt

Abstract

<p>The effect of negative credit card behaviors is examined for association with other forms of consumer debt (automobile debt, installment debt, and personal loan debt). Data were collected using a combination of random digit dialing and convenience sampling from two cities. Respondents' median age is 48 years old, ranging from 20-87. Results indicate that despite controlling for income, not paying off the monthly balance and reaching the maximum limit on credit cards are associated with a variety of other debts. Although consumers can increase lifetime utility by borrowing, less educated consumers are more vulnerable to less favorable sources of credit. Negative credit card behaviors can be easily identifiable signals of larger lurking issues related to consumer behavior or lack of financial literacy. Controlling for income, younger adults accrue significantly more installment debt, possibly suggesting that younger generations perceive a larger number of required appliances and electronics as being necessary to run the household than previous generations.</p>