The Savings and Credit Management of Low-Income, Low-Wealth Black and White Families

The greater reluctance of low-income, low-wealth Black families to use checking and savings accounts than of low-income, low-wealth White families is only partially explained by regression models that consider a wide array of demographic variables. The greater reluctance impedes Black families from getting the benefits of participating in financial markets. Moreover, the success of low-income, low-wealth Black families in managing credit is not found to differ from that of low-income, low-wealth White families. But the Black families owe less credit card and other noncollateralized debt than do the White families, implying either that Black families have a lower demand for such debt or that lenders are biased against them. Black families are less likely to achieve wealth increases than are White families because of differences in labor income and, to a lesser degree, gifts and inheritances. This has implications for the continued wealth disparity between Black Americans and White Americans.