Credit cards,new technology and consumer debt*

There has been a rapid expansion in consumer indebtedness in the U.K. The amount of consumer debt has doubled in real terms during the last 10 years. The majority of consumers are able to cope with their debt repayments, but there are a significant number of credit casualties, often burdened with multiple debts. Credit cards have played a significant but not overwhelming part in this increase in debt. There are now 62 bank credit cards for every 100 adults in the U.K., a much higher incidence than in any other European country. Credit cards have been aggressively marketed and sold, and it is possible that they will now move downmarket, to consumers in lower income groups. This possibility highlights the need for a major consumer education campaign on the cost of credit. U.K. consumers' knowledge of and ability to compare credit interest rates is poor, especially among lower income consumers who are most at risk.     

The debt burden of developing countries

According to OECD data¹, the external debts of developing countries totalled $ 625 billion at the end of 1982. As this does not include certain forms of credit, their indebtedness can be estimated at more than $ 700 billion, of which $ 500 billion consists just of bank loans. The resultant burden of interest and redemption payments has become so great that many more developing countries will be forced to seek rescheduling in the future. The debt burdens of developing countries and the vulnerability of the world financial system must be reduced for development policy reasons and also to ensure that the economies of the industrialised countries are not harmed. The following study suggests how this may be done.     

Credit: the consumer perspective

The U.K. has seen a considerable expansion in the use of credit during the 1980s. Although the majority of consumers are able to manage their use of credit there are many whose borrowing leads to hardship. There are various ways in which the availability of credit can be controlled but there is a high degree of reluctance to do so, both on the part of government and the credit card companies. A mechanism for assessing credit worthiness and a properly resourced system for assisting those who experience difficulties through using credit is needed. The social and economic consequences for consumers of the overuse of credit cannot be underestimated.     

Credit card use and knowledge in Thailand

This study examined the relationship between demographic characteristics of Thai credit card holders and the extent of credit card use, the level of credit card knowledge and the consumer choice perspectives. Data were collected by phone interview from Bangkok Bank credit card holders. Chi-square and Cramer's V were used to analyse the data. Only income and occupation were statistically related to credit card use. The results revealed that Thai credit card holders were not knowledgeable about credit card terms. They were influenced by environmental stimuli and society and group norms when they chose their credit card. They lacked sufficient information to make an informed choice when they applied for their cards. Implications for consumer educators and policy makers in developing nations are discussed.     

How product usage influences consumer satisfaction

This paper reports on an empirical investigation of the effect of product usage on consumer satisfaction in the context of consumer durables. It conceptualizes three dimensions of usage-usage frequency, usage function and usage situation-and examines the impact of these usage dimensions on satisfaction. Results of a field survey using five consumer durables suggest that the usage dimensions influence satisfaction through corresponding dimensions of usage disconfirmation, independent of the effect of performance disconfirmation on satisfaction. The specific dimensions of usage disconfirmation which influence satisfaction vary by product.     

Examining the impact of consumer debt on parent-child interaction

The purpose of this study was to examine the possible relationship between consumer debt and several aspects of parent-child interaction, namely time spent by parents with their child(ren). affectionate interaction between parents and children and disciplinary parent-child interaction. A small, positive relationship was found between consumer debt and disciplinary parent-child interaction. No meaningful relationship was found between consumer debt and parental time spent with child(ren) or affectionate parental-child interaction. Age and number of children are more reliable correlates of parent-child interaction than is amount of household consumer debt.     

Disconfirmation processes and consumer evaluations in product usage

Recent works on satisfaction theory have shown that disconfirmation plays a major role in the determination of satisfaction levels. Less, however, is known about the mental process used by consumers to form disconfirmation cognitions. This study operationalized and tested the role of two types of disconfirmation, inferential and overall (perceived), on the satisfaction of appetite suppressant users after first trial and repeat usage situations. Results showed that overall perceptions mediated the relationship between inferred disconfirmation and satisfaction in both time frames, as hypothesized.     

A comparative study of water usage in metered and unmetered households

The purpose of this research was to investigate the water usage in metered and unmetered households. The work also examined consumer attitudes towards water usage, including the belief of the need to use water more efficiently and the motivation to do so. Data were obtained by a self-administered questionnaire from 89 households in the Trafford area of Greater Manchester in the winter of 1995/6. This has provided information on ownership levels and age of water-using domestic appliances and outdoor water-using equipment. Although the survey showed some consumer awareness of eco-labelling, actual knowledge was low in both metered and unmetered households. Those respondents who thought water metering did, or would, encourage greater water efficiency were generally aware of how savings could be achieved. Metered households showed a stronger belief in the benefits of water economy. Twenty households each monitored their water usage for 7 consecutive days. A second questionnaire, aimed at clarifying practices, was then completed. This has provided information on total domestic water usage and variations in the components of water demand. Although there was a wide range of values in both metered and unmetered households, the frequency of use of appliances and equipment and per capita consumption were found to be related to household size. This showed larger households benefiting from an economy of scale. Metered households in this survey had a mean water consumption of 124·19 L/person/day compared with 137·28 L/person/day in unmetered households.     

Credit card behavior,financial styles,and heuristics

The paper makes four contributions. First, the paper provides new data and findings about credit card usage segmentation in respect to spending and borrowing behavior. Second, it sets the new findings against the backdrop of the newly emerging literature on financial literacy. A great variability occurs in financial literacy across American consumers. Third, the paper describes fast and frugal heuristics aimed to help consumers make effective, and in some cases better, budgeting decisions when they use credit cards. Fourth, the paper describes the introduction of a new set of online financial tools, offered by a large credit card company, which consumers are now using to make decisions about their spending and borrowing, and links these tools to the heuristics under discussion. Fast and frugal heuristics are likely to be especially valuable to consumers with low confidence in their online skills. Notably, 25% of credit cardholders report that they have low confidence using online technology to manage their finances, with the corresponding figure being 44% for those most at risk.     

Understanding consumer usage of product magnitudes through sorting tasks

Magnitudes describing product attributes are basic elements used in decision making. Although several researchers have emphasized the need to understand how consumers categorize product attributes, empirical research on this issue is rare. As a first step in developing and evaluating methodologies to examine this issue, a sorting task methodology is introduced to study this problem. Hypotheses were generated to address important theoretical issues relating to how consumers use magnitudes describing product attributes and tested in two studies. The results suggest that the number of magnitudes used by consumers to think about product attributes (i) is higher for abstract when compared to concrete attributes, and (ii) is positively related to the number of magnitudes used in an overall evaluation of liking. Results also provided evidence to support the use of the sorting method. © 1999 John Wiley & Sons, Inc.     

Effects of prior brand usage and promotion on consumer promotional response

We examine how prior purchases influence consumer response to promotional activity in brand choice decisions. To improve understanding of the nature of this influence, we separate previous purchases into those on promotion and those not on promotion, and consider their differential impact on subsequent brand choices. Impact may be observed at the brand level, category level, or both and we suggest circumstances in which each might occur. Across four product categories, consumer sensitivity to price, price promotions, and feature advertisements increases for all brands in the product category following a promotional purchase but also decreases for the most recently purchased brand. The magnitudes of the results indicate that prior promotional purchases influence choice more than prior brand usage does. We offer managerial recommendations regarding promotional activities, for both retailers and manufacturers.     

Measuring households' financial vulnerabilities from consumer debt: Evidence from Chile

This paper is concerned with measuring the financial vulnerability (FV) of households arising from consumer debt. Our case of application is Chile. Our main finding is that by applying a methodology that allows for households' heterogeneities and that accounts for contextual factors (like motives for asking for debt, exposure to shocks, family structure, holdings of assets and perspectives of future income), we better quantify the risks that financially vulnerable households may entail to the financial system.     

Credit cycle dependent spread determinants in emerging sovereign debt markets

We address credit cycle dependent sovereign credit risk determinants. In our model, the spread determinants' magnitude is conditional on an unobservable endogenous sovereign credit cycle as represented by the underlying state of a Markov regime switching process. Our explanatory variables are motivated in the tradition of structural credit risk models and include changes in asset prices, interest rates, implied market volatility, gold price changes and foreign exchange rates. We examine daily frequency variations of U.S. dollar denominated Eurobond credit spreads of four major Latin American sovereign bond issuers (Brazil, Colombia, Mexico and Venezuela) with liquid bond markets during March 2000 to June 2011. We find that spread determinants are statistically significant and consistent with theory, while their magnitude remarkably varies with the state of the credit cycle. Crisis states are characterized by high spread change uncertainty and high sensitivities with respect to the spread change determinants. We further document that not only changes of local currencies, but also changes of the Euro with respect to the U.S. dollar are significant spread drivers and argue that this is consistent with the sovereigns' ability to pay.     

Gendered consumer competences in households with one vs. two adults1

Consumption is gendered. Some markets can be described as female‐dominated, while others can be described as male‐dominated consumer areas. The departure of this article is observed gender differences in consumer competences, measured by men and women's self‐reported efforts to stay informed on different markets. Three central gender research hypotheses are applied to investigate the observed gender differences in consumer competences. Nowadays, modern consumer markets are characterized by abundance, complexity and rapid changes, making it hardly possible for any consumer to master all markets he or she operates in. Because very much of the consumption takes place within the households, it should be convenient to live in a household with two adult persons who can share responsibilities and stay informed on the different segments of the markets. However, many households consist of only one adult person. Our main concern has been to investigate whether the observed gender differences in consumer competences could be explained by the specializing hypothesis, i.e. that the gendered pattern relies on a gendered division of consumer competences within couple households; in other words, that gender differences in consumer competences among single‐person households should be absent, or significantly lower, than among couple households. In case we would not find support for the specializing hypothesis, two other probable explanations are also put forward: the traditional gender difference hypothesis and the selection hypothesis. These three hypotheses are tested in a data material based on 2000 telephone interviews from the SIFO survey, collected in 2007.     

The role of time preference and credit card usage in compulsive buying behaviour

College students represent a lucrative market for businesses selling a wide array of goods and services, including credit. One area of concern regarding credit debt is its association with compulsive buying behaviour. This study analysed compulsive buying behaviour within an economic framework using a college student sample. Data were collected from 7342 students enrolled in a major Midwestern university. Regression analysis revealed that income, rate of time preference, money attitudes, credit card usage and gender were significantly related to compulsive buying. This study provides useful information for developing, or revising, university policies regarding financial education and counselling, as well as curriculum considerations.     

How the burdens of ownership promote consumer usage of access-based services

Services that let customers access goods, such as car-sharing, are gaining increasing relevance as an alternative to ownership. These access-based services allow consumers to avoid the “burdens of ownership”, i.e., risks and responsibilities that come with owning a good. However, the interplay between consumers’ risk perception of ownership, access-based service usage, and the subsequent decision to reduce or forgo ownership has not been sufficiently investigated. Based on risk perception theory, we hypothesize the effects of different risk dimensions (financial, performance, social) on the intensity of access-based service usage, as well as the latter’s influence on ownership reduction. Using a unique dataset that links survey and actual usage data of car-sharing users, we test four corresponding hypotheses. The results reveal that access-based service usage is positively influenced by all three ownership risk perceptions. Moreover, a higher usage of an access-based service increases the likelihood that consumers subsequently reduce ownership.     

Beyond formal retailing and consumer services: an examination of how households acquire goods and services

The aim of this paper is to show that the acquisition of goods and services through formal firms is less widespread than might be expected. Drawing upon empirical evidence from a deprived neighbourhood, this paper finds that a large proportion of goods and services are informally acquired. In the realm of goods acquisition, informalisation is normally a result of economic necessity and is the first option but second choice of households. In the sphere of consumer services, however, informal modes of provision are often preferred by households and actively chosen over formal consumer services. The implications of these findings for how households acquire goods and services in the wider society are then considered so as to start to open up a debate on the consequences of informality in retailing and consumer services.