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Financial literacy and consumer credit portfolios

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Author Info

  • Disney, Richard
  • Gathergood, John

Abstract

We use survey data from a sample of UK households to analyse the relationship between financial literacy and consumer credit portfolios. We show that individuals who borrow on consumer credit exhibit worse financial literacy than those who do not. Borrowers with poor financial literacy hold higher shares of high cost credit (such as home collected credit, mail order catalogue debt and payday loans) than those with higher literacy. We also show that individuals with poor financial literacy are more likely to lack confidence when interpreting credit terms, and to exhibit confusion over financial concepts. They are also less likely to engage in behaviour which might help them to improve their awareness of the credit market.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 7 ()
Pages: 2246-2254

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:7:p:2246-2254

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Financial literacy; Consumer credit; Debt portfolios;

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References

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Cited by:
  1. Elisabeth Beckmann & Helmut Stix, 2014. "Foreign currency borrowing and knowledge about exchange rate risk," Working Papers 188, Oesterreichische Nationalbank (Austrian Central Bank).

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