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

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  • Jing Jian Xiao

    (University of Rhode Island)

  • Kyoung Tae Kim

    (University of Alabama)

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.

Suggested Citation

  • Jing Jian Xiao & Kyoung Tae Kim, 2022. "The Able Worry More? Debt Delinquency, Financial Capability, and Financial Stress," Journal of Family and Economic Issues, Springer, vol. 43(1), pages 138-152, March.
    • Handle: RePEc:kap:jfamec:v:43:y:2022:i:1:d:10.1007_s10834-021-09767-3
    DOI: 10.1007/s10834-021-09767-3
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    More about this item

    Keywords

    Debt delinquency; Financial stress; Financial capability; National Financial Capability Study;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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