Self-Control, Financial Literacy and Consumer Over-Indebtedness

44 Pages Posted: 27 Jun 2011 Last revised: 22 Feb 2012

See all articles by John Gathergood

John Gathergood

University of Nottingham - School of Economics

Date Written: June 27, 2011


This paper examines the relationship between self-control, financial literacy and over-indebtedness on consumer credit debt among a sample of U.K. consumers using data from a household survey. Both lack of self-control and financial illiteracy are positively associated with non-payment of consumer credit and self-reported excessive financial burdens of debt. Consumers who exhibit self-control problems are shown to make greater use of quick-access but high cost credit items such as store cards and payday loans. We also find consumers with self-control problems are more likely to suffer income shocks, credit withdrawals and unforeseen expenses on durables, suggesting that lack of self-control increases exposure to a variety of risks. In most specifications we find a stronger role for lack of self-control than for financial illiteracy in explaining consumer over-indebtedness.

Keywords: over-indebtedness, financial literacy, self-control

JEL Classification: D03, D12, E21

Suggested Citation

Gathergood, John, Self-Control, Financial Literacy and Consumer Over-Indebtedness (June 27, 2011). Journal of Economic Psychology, Forthcoming. Available at SSRN: or

John Gathergood (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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