College students who use credit cards know risks

Erie, Pa. -- College students who are lavish users of credit cards admit that the cards get them into financial trouble, yet they seem unable to resist using the plastic, according to Penn State researchers.

College students who have credit cards report significantly different attitudes about credit depending on their level of credit card use. It is important to differentiate between different types of credit card users such as convenience users and installment users, says Dr. Mary Beth Pinto, associate professor of marketing at Penn State Erie, The Behrend College.

Convenience users utilize their cards as a substitute for cash and pay the balance in full each month. Installment users carry a monthly balance and use their credit card as a source of short-term revolving credit.

"Attitude breaks down into three parts: behavior, affect or feelings about something and knowledge," she adds. "The purpose of our study was to show how the tri-components of attitude varied by whether or not a student was a convenient user, a mild installment user or a heavy installment user."

Pinto is lead author of the paper, "Relationship of Credit Attitude and Debt to Self-Esteem and Locus of Control in College Age Consumers," recently published in the journal Psychological Reports. Her co-authors are Dr. Phylis M. Mansfield, assistant professor of marketing, and Dr. Diane H. Parente, assistant professor of management, both at Penn State Erie.

In terms of knowledge or beliefs regarding credit cards, convenience users and mild installment users report little difficulty in managing their debt, Pinto notes. On the other hand, heavy installment users, who carry at least four times the debt load of mild installment users, acknowledge that credit cards have gotten them into financial trouble and that they will not be able to pay off their credit card debts until they graduate from college. Nevertheless, knowing the disadvantages does not cause them to change their spending habits, the Penn State Erie researchers say.

In terms of their affect or feelings about credit cards, convenience users and mild installment users both report lower levels of anxiety about their credit card habits. Heavy installment users are more worried about paying of their credit card debt and are more discouraged about the amount of money that they owe on their credit card bills, perhaps because of the amount of their debt.

"When considering the behavior dimension of attitude, individuals who do not carry a monthly balance report significantly different behavioral tendencies with regard to credit card spending. These convenience users are less likely to make impulse purchases or buy more than they can afford when compared to either mild or heavy installment users," Pinto says.

Not surprisingly, heavy installment users, as compared to convenience and mild installment users, hold, on average, a much larger number of credit cards. Parente notes, "This finding is consistent with warnings by credit counselors to college students that more cards tend to lead higher outstanding balances."

While they have differing attitudes toward credit cards, college credit card holders in these three categories showed no significant difference in two key psychological factors: self-esteem and locus of control or a sense of being in control of one's life, instead of being controlled by some outside force such as fate or chance.

"The results of our study do not support previous research which found that both self esteem and locus of control were related to shopping behavior and credit card spending," says Mansfield.

The researchers surveyed 589 traditional (age 18-22) college students at 11 public and private U.S. colleges during the 2001-02 academic year. This student sample owned an average number of 2.16 credit cards per student, with the number of credit cards per student ranging from 1 to 22. Twenty-five percent of the students paid off their credit card balances every month. The other 75 percent (442) carried a combined credit card debt of almost $400,000, with the average outstanding balance per student at $686.

The researchers' questions to students measured knowledge and beliefs about credit cards; sought to identify behavior regarding credit cards (e.g. "I make more impulse purchases when I use credit cards"); and determine feelings in connection with credit cards (e.g. "Whenever I use a credit card, I think about what I owe"). The questions also factored in levels of self-esteem and locus of control.

"We know that college age consumers are heavily targeted by credit card companies. This study represents an important first step at developing a profile of the different types of college credit card users," Pinto says. "Having a credit card is not a bad thing. It is how you use it. We have found very different perceptions among the three categories of credit card users investigated in this study."

Last Updated July 28, 2017