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Credit card behavior, financial styles, and heuristics

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  • Shefrin, Hersh
  • Nicols, Christina M.

Abstract

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.

Suggested Citation

  • Shefrin, Hersh & Nicols, Christina M., 2014. "Credit card behavior, financial styles, and heuristics," Journal of Business Research, Elsevier, vol. 67(8), pages 1679-1687.
  • Handle: RePEc:eee:jbrese:v:67:y:2014:i:8:p:1679-1687
    DOI: 10.1016/j.jbusres.2014.02.014
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    References listed on IDEAS

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    Cited by:

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    2. Hoffmann, Arvid O.I. & Plotkina, Daria, 2020. "Why and when does financial information affect retirement planning intentions and which consumers are more likely to act on them?," Journal of Business Research, Elsevier, vol. 117(C), pages 411-431.
    3. Ayub, Usman & Qaddus, Uzma & Zakaria, Muhammad & Shafique, Attayah & Ahmed, Junaid, 2018. "Thou should not panic! Let calmness fight the Crocodile Bite," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 302-315.
    4. Loock, Moritz & Hinnen, Gieri, 2015. "Heuristics in organizations: A review and a research agenda," Journal of Business Research, Elsevier, vol. 68(9), pages 2027-2036.
    5. Zhang, C. Yiwei & Sussman, Abigail B. & Wang-Ly, Nathan & Lyu, Jennifer K., 2022. "How consumers budget," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 69-88.
    6. Boglárka Zsótér, 2018. "The Aspects Of Financial Culture Among Young Adults," Ekonomske ideje i praksa, Faculty of Economics and Business, University of Belgrade, issue 30, pages 51-71, September.
    7. Schultz, Ainslie E. & Lamberton, Cait & Nielsen, Jesper H., 2017. "Does pulling together lead to falling apart? The self-regulatory consequences of cooperative orientations for the self-reliant," Journal of Business Research, Elsevier, vol. 81(C), pages 70-79.
    8. Lerman, Dawn & Shefrin, Hersh, 2015. "Positive marketing: Introduction to the special section," Journal of Business Research, Elsevier, vol. 68(12), pages 2443-2445.

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