The Effects of Financial Literacy on Credit Card Behaviors Sam Allgood University of Nebraska-Lincoln William Walstad University of Nebraska-Lincoln

Measuring Financial Literacy We use test scores & self-ratings to form four groups Skilled/Confident (high score & high rating) Unskilled/Confident (low score & high rating) Skilled/Insecure (high score & low rating) Unskilled/Insecure (low score & low rating) We data from a national sample of 1,488 adults collected for the National Financial Capability Study ( We use test scores & self-ratings to form four groups Skilled/Confident (high score & high rating) Unskilled/Confident (low score & high rating) Skilled/Insecure (high score & low rating) Unskilled/Insecure (low score & low rating) We data from a national sample of 1,488 adults collected for the National Financial Capability Study (

Credit Card Behaviors Not Paid Full I do not always pay my credit cards in full. [46% yes] Carry Balance I carried over a balance and was charged interest. [51% yes] Minimum Payment I paid the minimum payment only. [29% yes] Late Fee I was charged a late fee for a late payment. [23% yes] Exceed Credit I was charged a fee for exceeding my credit line. [8% yes] Not Paid Full I do not always pay my credit cards in full. [46% yes] Carry Balance I carried over a balance and was charged interest. [51% yes] Minimum Payment I paid the minimum payment only. [29% yes] Late Fee I was charged a late fee for a late payment. [23% yes] Exceed Credit I was charged a fee for exceeding my credit line. [8% yes]

Financial Literacy Groups Not Paid Full Carry Balance Minimum Payment Late Fee Exceed Limit Skilled/Confident 36% 45% 16% 3% Unskilled/Confident Skilled/Insecure Unskilled/Insecure Sample size1,0401,042 1,0461,045

Financial Literacy Results Skilled/Confident compared with Unskilled/Insecure is: less likely to not pay in full……………....(36% vs. 55%) less likely to carry a balance…………….(45% vs. 58%) less likely to make minimum payment...(16% vs. 41%) less likely to pay a late fee………………..(16% vs. 29%) less likely to exceed a credit limit……… (3% vs. 13%) Unskilled/Confident is most similar to Skilled/Confident Skilled/Insecure is mixed because it is similar to both: Unskilled/Confident & Unskilled/Insecure Skilled/Confident compared with Unskilled/Insecure is: less likely to not pay in full……………....(36% vs. 55%) less likely to carry a balance…………….(45% vs. 58%) less likely to make minimum payment...(16% vs. 41%) less likely to pay a late fee………………..(16% vs. 29%) less likely to exceed a credit limit……… (3% vs. 13%) Unskilled/Confident is most similar to Skilled/Confident Skilled/Insecure is mixed because it is similar to both: Unskilled/Confident & Unskilled/Insecure

Conclusions Financial literacy improves credit card behaviors. The type of financial literacy matters. Financial confidence is as or more important than just financial skills. Financial education programs should focus on improving both financial confidence and financial skills to have the most positive effects on credit card behaviors. Financial literacy improves credit card behaviors. The type of financial literacy matters. Financial confidence is as or more important than just financial skills. Financial education programs should focus on improving both financial confidence and financial skills to have the most positive effects on credit card behaviors.