Researchers probe how young consumers learn to use and misuse credit cards

November 24, 2003

The use or misuse of credit cards by young adults has attracted much attention from the public, with calls for earlier programs in financial literacy. Two Penn State researchers, however, have found a wide variety of background factors that influence how young people utilize credit cards.

These factors not only include gender, age, socioeconomic status, ethnicity and culture, but also family communication and parenting methods, and individual traits such as a person's values and levels of materialism. Credit knowledge is only one of the many factors with impact on credit card management, the researchers say.

Dr. Phylis M. Mansfield, assistant professor of marketing, and Dr. Mary Beth Pinto, associate professor of marketing -- both in the Sam and Irene Black School of Business at Penn State Erie, The Behrend College -- have developed a conceptual model examining the process by which consumers learn to use and abuse credit cards in the marketplace. Their analysis is based on their research of five years combined with the work of other researchers. They recently presented the model at the Association of Consumer Research International Conference in Toronto.

"Our research addresses a very important area of consumer behavior. Young people today have grown up with the credit card as a way of life. Yet we know very little about how they learn about credit cards and their use," says Mansfield.

"Parents, schools, peers, and the media are all part of a young person's learning and socialization from birth to adulthood," says Pinto. "All of these background factors affect a young person's credit consciousness - or awareness of the advantages and problems involved with credit cards."

While parents, schools, peers and the media all influence a young adult's consumer behavior; it is the parents who have the greatest amount of influence on a young person's credit card behavior. Children learn from their parents about credit card usage in two primary ways through direct teaching of its advantages and disadvantages, and through modeling of their own behavior. Children learn about how to use credit cards by watching how their parents use credit, researchers say.

Many students on college campuses benefit from what they have learned at home about credit. However, there are still other influences that can impact their use of credit cards, the researchers note. Some are likely to run up a big credit card debt if they see it as a release for stress or a way to have some sense of power over their lives as young adults. Some simply view it as an abstract form of money, something that isn't real. One student remarked that he didn't think about having to pay the money back when running up his credit card balance; it was just "free" to spend as he wished.

"The use of credit cards is not necessarily a bad practice, but the recent increase in bankruptcies for those under 25 -- which rose 51 percent during the 1990s - tells us that that we need to learn more about what leads to credit misuse," Pinto notes.

Freshman orientation programs in credit card management may be helpful in some cases, but they may not be enough to reach a hard-core group of students who find themselves continually in debt, the researchers note.

"This particular research model will continue to focus on the amount of impact various influences such as parents, the media, personality, credit knowledge and socioeconomic background have on credit card spending," says Mansfield. "Our model will extend current research on consumer socialization to address the specific context of credit card usage, which is an important part of consumer behavior."

Pinto adds, "We plan on expanding this model to include the influence of culture as well, by looking at data from other countries around the world. Hopefully, the research will help identify factors that lead to inappropriate usage of credit and contribute to measures that can prevent consumer debt and especially keep college students from incurring a huge credit card balance before they graduate."

Penn State

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