Multidimensional credit attitude and credit card debt behavior in the United States

The purpose of this study is to construct composite index variables of credit attitude using six attitudinal variables. This study also examines the relationship between consumer credit attitude and credit card debt behaviors.

This study used the pooled dataset of the 2010 and 2013 Survey of Consumer Finances (SCF) released by the Federal Reserve Board. A total of 8,417 households were used as our analytic sample. The credit card indices were constructed using factor analysis with polychoric correlations. Factors of the credit card debt behaviors were estimated using hierarchical logistic regression models.

The results of factor analysis identified two credit attitude indices (wants and needs). The results of hierarchical logistic regression analyses show that the credit attitude indices have a positive influence on payment behaviors; households with more favorable attitudes about credit use for non-necessities (wants) were more likely to hold an outstanding credit card balance, have irregular payment practice and pay a revolving charge.

Although there is ample documentation in the literature of credit behavior, the current literature is deficient in some areas for not addressing unobserved consumer attitudinal dispositions. Further, the separate treatment of selected survey items or an additive scale of survey items has been widely used; however, this approach cannot capture multidimensional characteristics among attitudinal items if credit attitude is not necessarily unidimensional. In response to the shortfall in the extant literature on credit card behavior, this study examined multidimensional aspects of credit attitude as a determinant of credit card debt behavior through methodological justification. Implications for future research and practitioners are provided.