Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

How American consumers view debt: a case study

20.04.2011
A new study published this month suggests that while younger Americans are more smitten with credit cards and debt than older Americans, the older generation helps enable their children by encouraging use of credit as a "safety mechanism."

The findings were based on case studies conducted with 27 white, middle-class Americans in 2006. The researchers, Michelle Barnhart of Oregon State University and Lisa Peñaloza of Ecole des Hautes Etudes Commerciales du Nord of France, wanted to explore some of the attitudes, perceptions and cultural meanings behind how Americans view and use debt and credit that could have contributed to the economic recession.

The results, which include detailed interviews with participants, are currently available online and will be published in the December issue of the Journal of Consumer Research.

"The economic crash was not just about people being dumb or greedy," Barnhart said. "There are compelling forces out there that lead people to live lifestyles outside of their means."

In 2008 alone, Americans spent 9.3 percent of their income servicing debt. And in 2010, more than 24 percent of homes in the United States had an upside-down mortgage owing more than the homes were worth. Based on interviews conducted before the 2008 financial crisis, researchers found that even though consumers espouse that they should limit their debt, they take on significant debt because doing so has become normal. As one participant put it, taking on debt is "the American way."

Barnhart and Peñaloza's research yielded a few key findings, including:

Americans suffer from a lack of financial literacy. Every participant said they had learned about credit card use and debt primarily through personal experience. Very few had received any training in school or at home, and most participants said they didn't discuss family finances with their children.

Half of the participants had debt they were unable to pay and one-third of them were dealing with collection agencies.

Participants often talked about credit as a measure of worth, noting that if they were approved for a certain loan they were "good enough for that car." Statements often indicated that approval for big-ticket items such as cars and homes were directly related to a value of the person.

Those who had credit cards and paid them off each month tended to be older, and had higher incomes.

Several of the younger participants in the study noted that they did not want to use credit, but felt they had to in order to finance cars and homes in the future. Most of the younger participants also were encouraged by their parents to have credit cards, and started using credit at a much younger age than those older than 50.

Barnhart, who is an assistant professor of marketing at OSU, said much of the research done on cultural behavior and attitudes leading up to the economic downturn has focused on ethnic minorities and low-income minorities. However, she said it has been some of the most educated and privileged of Americans who have engaged in risky financial behavior.

This case study, while a small sample, was able to ask detailed questions to probe into deeper issues within American society.

"Over time, credit card use and heavy debt has become normalized in our culture," she said. "Even though we say as a society, 'don't get in debt,' the overwhelming messages being sent out – from the way credit is used to approve or disapprove us for services to political leaders telling us to spend after a big disaster to prove our patriotism – all of this has created a culture of debt."

One of the few young participants to not carry any debt said she felt punished for her refusal to have a credit card. She was refused a cell phone, and had encountered embarrassing situations during business travel because she did not have a credit card. Barnhart said this system of penalizing consumers for not using credit is one of the problems.

"Your credit score is this big black box mystery," she said. "There are three companies in the entire country that control this information, and they make the rules and the equation is secret. So people are told to get credit cards, but not use them. For some, this is equivalent to filling your freezer with ice cream and telling you not to eat it."

Barnhart would like to next do a study about how norms, values, and habits have changed since the economic crisis. However, she said financial literacy is still the missing link in American society. She and Peñaloza believe that financial literacy classes should be required in schools, and that these classes should not only address credit card fees and compound interest, but also critique debt as a cultural value.

"It's easy to sit back and blame consumers for just spending too much, but the truth is we have an entire infrastructure set up to support, maintain and encourage credit card use and debt," Barnhart said. "I would love to see economics back in high school classes that addresses how to manage household finances. And firms need to step up. The 2010 credit card reform was a step in the right direction, but more needs to be done."

Michelle Barnhart | EurekAlert!
Further information:
http://www.oregonstate.edu

More articles from Studies and Analyses:

nachricht Smart Data Transformation – Surfing the Big Wave
02.12.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT

nachricht Climate change could outpace EPA Lake Champlain protections
18.11.2016 | University of Vermont

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Shape matters when light meets atom

Mapping the interaction of a single atom with a single photon may inform design of quantum devices

Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

Im Focus: MADMAX: Max Planck Institute for Physics takes up axion research

The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.

The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...

Im Focus: Molecules change shape when wet

Broadband rotational spectroscopy unravels structural reshaping of isolated molecules in the gas phase to accommodate water

In two recent publications in the Journal of Chemical Physics and in the Journal of Physical Chemistry Letters, researchers around Melanie Schnell from the Max...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

High-precision magnetic field sensing

05.12.2016 | Power and Electrical Engineering

Construction of practical quantum computers radically simplified

05.12.2016 | Information Technology

NASA's AIM observes early noctilucent ice clouds over Antarctica

05.12.2016 | Earth Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>