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Self-control, financial literacy and consumer over-indebtedness

  • Gathergood, John

This paper examines the relationship between self-control, financial literacy and over-indebtedness on consumer credit debt among UK consumers. Lack of self-control and financial illiteracy are positively associated with non-payment of consumer credit and self-reported excessive financial burdens of debt. Consumers who exhibit self-control problems are shown to make greater use of quick-access but high cost credit items such as store cards and payday loans. We also find consumers with self-control problems are more likely to suffer income shocks, credit withdrawals and unforeseen expenses on durables, suggesting that lack of self-control increases exposure to a variety of risks. In most specifications we find a stronger role for lack of self-control than for financial illiteracy in explaining consumer over-indebtedness. We discuss the policy implications of these findings.

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Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 33 (2012)
Issue (Month): 3 ()
Pages: 590-602

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Handle: RePEc:eee:joepsy:v:33:y:2012:i:3:p:590-602
Contact details of provider: Web page: http://www.elsevier.com/locate/joep

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