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Credit card debts of the poor: High and rising

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Author Info

  • Edward J. Bird

    (University of Rochester)

  • Paul A. Hagstrom

    (Department of Economics, Hamilton College)

  • Robert Wild

    (Department of Economics, Hamilton College)

  • Janet A. Weiss

    (School of Public Policy, University of Michigan, Ann Arbor, MI 48109-1220)

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    Abstract

    In this article we report on a little-known aspect of the consumer credit explosion: It has also happened among the poor. Focusing on credit cards, we use data from four releases of the Survey of Consumer Finances (SCF), 1983-1995, to trace the evolution of the debt position of the poor as compared to that of the population at large. The data indicate that from 1983 to 1995 the fraction of poor households with a credit card more than doubled, and the average balances held on these cards rose almost as rapidly as the balances of nonpoor households. In 1983, fewer than 1 in 30 poor households had credit card debts greater than twice their monthly incomes; by 1995, more than 1 in 8 did. There is no strong evidence at the moment that the added debt has increased the financial distress of these households. Nonetheless, because of the debt increase, poor households at the end of the 1990s are more vulnerable to an economic downturn than they were at the end of the 1980s.© 1998 by the Association for Public Policy Analysis and Management

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 18 (1999)
    Issue (Month): 1 ()
    Pages: 125-133

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    Handle: RePEc:wly:jpamgt:v:18:y:1999:i:1:p:125-133

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    Web page: http://www3.interscience.wiley.com/journal/34787/home

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    1. Brito, Dagobert L & Hartley, Peter R, 1995. "Consumer Rationality and Credit Cards," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 400-433, April.
    2. Ian Domowitz & Robert L. Sartain, . "Incentives and Bankruptcy Chapter Choice: Evidence from the Reform Act of 1978," IPR working papers 98-7, Institute for Policy Resarch at Northwestern University.
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    Cited by:
    1. Zhan, Min & Sherraden, Michael, 2011. "Assets and liabilities, race/ethnicity, and children's college education," Children and Youth Services Review, Elsevier, vol. 33(11), pages 2168-2175.
    2. Pryor, Frederic L., 2007. "The anatomy of increasing inequality of U.S. family incomes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(4), pages 595-618, August.
    3. Heather Boushey & Christian E. Weller, 2006. "Inequality and Household Economic Hardship in the United States of America," Working Papers 18, United Nations, Department of Economics and Social Affairs.
    4. Grinstein-Weiss, Michal & Spader, Jonathan & Yeo, Yeong Hun & Taylor, Andréa & Books Freeze, Elizabeth, 2011. "Parental transfer of financial knowledge and later credit outcomes among low- and moderate-income homeowners," Children and Youth Services Review, Elsevier, vol. 33(1), pages 78-85, January.
    5. Yunhee Chang & Angela Lyons, 2007. "Are Financial Education Programs Meeting the Needs of Financially Disadvantaged Consumers?," NFI Working Papers 2007-WP-02, Indiana State University, Scott College of Business, Networks Financial Institute.
    6. Joanna Stavins, 2000. "Credit card borrowing, delinquency, and personal bankruptcy," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 15-30.

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