TY  - UNPD
A1  - Lusardi, Annamaria
A1  - Tufano, Peter
T1  - Debt literacy, financial experiences, and overindebtedness
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,08
N2  - We analyze a national sample of Americans with respect to their debt literacy, financial experiences, and their judgments about the extent of their indebtedness. Debt literacy is measured by questions testing knowledge of fundamental concepts related to debt and by selfassessed financial knowledge. Financial experiences are the participants’ reported experiences with traditional borrowing, alternative borrowing, and investing activities. Overindebtedness is a self-reported measure. Overall, we find that debt literacy is low: only about one-third of the population seems to comprehend interest compounding or the workings of credit cards. Even after controlling for demographics, we find a strong relationship between debt literacy and both financial experiences and debt loads. Specifically, individuals with lower levels of debt literacy tend to transact in high-cost manners, incurring higher fees and using high-cost borrowing. In applying our results to credit cards, we estimate that as much as one-third of the charges and fees paid by less knowledgeable individuals can be attributed to ignorance. The less knowledgeable also report that their debt loads are excessive or that they are unable to judge their debt position. JEL Classification: D14, D91
T3  - CFS working paper series - 2009, 08 
KW  - USA
KW  - Haushalt
KW  - Schulden
Y1  - 2009
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/6280
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-63796
ER  -