Attitudes, Personality Factors and Household Debt Decisions: A Study of Consumer Credit

Abstract

The share of consumer credit on household debt as grown noteworthy with it during the last twenty years across many developed countries. A fairly extensive literature from the field of empirical psychology has provided evidence that personality factors and attitudes toward credit may influence individuals' debt financing decisions. This paper investigates the importance of these factors by analysing the results of an original survey about the recourse to consumer credit, conducted on a wide sample of Italian households. Three main research questions are addressed. Is there any relationship between personality, attitude and recourse to consumer credit? Are there any differences in psychological profiles of credit users and non-users that can be associated with the motivations for using consumer credit? Does the psychological profile affect the preferred way of financing consumption (e.g. by credit card rather than bank debt)? This study improves on most existing research on these topics because of the larger than usual sample size and scope, and also since several studies from the psychological field are lacking in the assessment of household economic conditions and expectations. According to the analyses that have been performed, the influence of psychological factors on consumer credit decisions cannot be rejected. Attitudes toward debt appear to play an important role and are significantly related to motivations for using credit and to the preferred form of financing. Personality factors do not emerge as having a clearcut effect on the decision to taking on debt. While this is in line with some previous research findings, when personality's features make a difference this is in the opposite direction of what is commonly found, as more fatalistic individuals are less likely to use consumer credit.