IDEAS home Printed from https://ideas.repec.org/p/wop/wispod/1148-97.html
   My bibliography  Save this paper

Credit Cards and the Poor

Author

Listed:
  • E. J. Bird
  • P. A. Hagstrom
  • R. Wild

Abstract

We use data from four releases of the Survey of Consumer Finances, 1983 to 1995, to examine credit card use among the poor. The credit card market has expanded rapidly in the general population and, given the often transitory nature of poverty, more and more families may be using credit cards rather than welfare or other means to smooth consumption across income shortfalls. Indeed, from 1983 to 1995, the percentage of poor families holding a credit card rose from less than 20 percent to almost 40 percent, and the average real balance on these cards rose from about $700 to more than $1,300. In 1983 the proportion of poor families with a credit card balance more than twice its monthly income was less than 1 in 30, but rose to 1 in 8 by 1995. The growth in debt represents a new and increasingly important development in the nature of poverty since the mid-1980s, and may soon create a need for administrative policy responses in the form of credit and debt management counseling for at-risk families. Among the research questions are raised are (1) Why has the credit card market expanded to include more economically vulnerable households? and (2) Is the new existence of easy credit temporarily softening the impact of welfare reform?

Suggested Citation

  • E. J. Bird & P. A. Hagstrom & R. Wild, "undated". "Credit Cards and the Poor," Institute for Research on Poverty Discussion Papers 1148-97, University of Wisconsin Institute for Research on Poverty.
  • Handle: RePEc:wop:wispod:1148-97
    as

    Download full text from publisher

    File URL: http://www.irp.wisc.edu/publications/dps/pdfs/dp114897.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Peter Gottschalk, 1997. "Inequality, Income Growth, and Mobility: The Basic Facts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 21-40, Spring.
    2. Edward J. Bird, 1996. "Repairing the safety net: Is the EITC the right patch?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 15(1), pages 1-31.
    3. Calem, Paul S & Mester, Loretta J, 1995. "Consumer Behavior and the Stickiness of Credit-Card Interest Rates," American Economic Review, American Economic Association, vol. 85(5), pages 1327-1336, December.
    4. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August.
    5. Ruggles, Patricia & Williams, Roberton, 1989. "Longitudinal Measures of Poverty: Accounting for Income and Assets over Time," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 35(3), pages 225-243, September.
    6. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
    7. Glenn B. Canner & Arthur B. Kennickell & Charles A. Luckett, 1995. "Household sector borrowing and the burden of debt," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 323-338.
    8. Glenn B. Canner & Charles A. Luckett, 1992. "Developments in the pricing of credit card services," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 652-666.
    9. 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.
    10. Wolff, Edward N, 1992. "Changing Inequality of Wealth," American Economic Review, American Economic Association, vol. 82(2), pages 552-558, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael A. Stegman, 2007. "Payday Lending," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 169-190, Winter.
    2. Athreya, Kartik & Tam, Xuan S. & Young, Eric R., 2009. "Unsecured credit markets are not insurance markets," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 83-103, January.
    3. Amanda Moore & Sondra Beverly & Mark Schreiner & Michael Sherraden & Margaret Lombe & Esther Y. N. Cho & Lissa Johnson & Rebecca Vonderlack, 2001. "Saving, IDA Programs, and Effects of IDAs: A Survey of Participants," Microeconomics 0108002, EconWPA, revised 27 Dec 2001.
    4. Basnet, Hem C. & Donou-Adonsou, Ficawoyi, 2016. "Internet, consumer spending, and credit card balance: Evidence from US consumers," Review of Financial Economics, Elsevier, vol. 30(C), pages 11-22.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:wispod:1148-97. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel). General contact details of provider: http://edirc.repec.org/data/iruwius.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.