Patterns of Credit Card Use Among Low and Moderate Income Households

37 Pages Posted: 14 Apr 2008

See all articles by Ronald J. Mann

Ronald J. Mann

Columbia University - Law School

Date Written: April 10, 2008


This chapter uses data from the Federal Reserve Board's Survey of Consumer Finances for 2004 (the "SCF") to examine the penetration of credit cards into LMI markets. The chapter has two purposes. First, I discuss the rise of the modern credit market, emphasizing the segmentation of product lines based on behavioral and financial characteristics of customer groups. Among other things, that trend involves the use of products aimed at LMI households that differ significantly from those aimed at middle-class households. Second, I describe the extent to which LMI households borrow on credit cards, the types of LMI households that borrow, and how they differ from the more affluent households that borrow. Despite lower incomes, credit card use is almost as common among LMI households as it is among more affluent households. Indeed, measured as a share of income, the credit card balances that LMI cardholders carry are substantially higher than those of more affluent households. To check the robustness of those results, the chapter closes with the results of a multivariate regression analysis of the characteristics of LMI households with credit card debt. Generally, those results suggest that the demographic characteristics of LMI households that have credit card debt are different in material ways from the characteristics of those with credit card debt in the overall population. The models that I summarize here suggest that age, race, and education are important predictors of credit card use in the population at large. At least in these models, however, age and race become insignificant and education is only marginally important in predicting credit card use in LMI households. In LMI households, by contrast, the most significant predictors of credit card use are employment status, the use of other financial products (checking accounts, mortgage loans, and car loans), and marital status.

Suggested Citation

Mann, Ronald J., Patterns of Credit Card Use Among Low and Moderate Income Households (April 10, 2008). Available at SSRN: or

Ronald J. Mann (Contact Author)

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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