The Effects of Gender and Marital Status on Accrued Debt in Retirement Planning

The effects of gender and marital status on accrued debt in retirement planning becomes an urgent concern because unmarried women face greater financial challenges in retirement than their counterparts. This study used data from the National Financial Capability Study (NFCS), designed by FINRA. We identified debt that influences retirement planning among a sample of pre-retirees, aged 51 to 61 years, and consider the associations of gender, marital status, debt, and retirement planning. Our results indicated that mortgage debt and credit card debt were negatively associated with retirement planning for women. Having a retirement account is positively associated with retirement planning and it also mediates the relationship between credit card debt and retirement planning. We urge women and financial planning executives to take time during the pre-retirement years to assess their various forms of debt and determine how it affects retirement planning objectives given current marital status.

Indonesian Islamic moral incentives in credit card debt repayment: A feature selection using various data mining

Purpose Despite the practice of credit card services by Islamic financial institutions (IFIs) is debatable, Islamic banks (IBs) have been offering this product. Both Muslim and non-Muslim customers have subscribed to the products. Thus, it is critical to analyse the strategy of IBs’ moral messages in reminding their Muslim and non-Muslim customers to repay their credit card debts. This paper aims to investigate this issue in Indonesia using data mining via machine learning. Design/methodology/approach This study examines the IBs’ customers across the 32 provinces of Indonesia regarding their moral status in credit card debt repayment. This work considers 6,979 observations of the variables that affect the moral status of the IBs’ customers in repaying their debt. The five types of data mining via machine learning (i.e. Boruta, logistic regression, Bayesian regression, random forest, XGBoost and spatial cluster) are used. Boruta, random forest and XGBoost are used to select the important features to investigate the moral aspects. Bayesian regression is used to get the odds and opportunity for the transition of each variable and spatially formed based on the information from the logistical intercepts. The best method is selected based on the highest accuracy value to deliver the information on the relationship between moral status categories in the selected 32 provinces in Indonesia. Findings A different variable on moral status in each province is found. The XGBoost finds an accuracy value of 93.42%, which the three provincial groups have the same information based on the importance of the variables. The strategy of IBs’ moral messages by sending the verse of al-Qur’an and al-Hadith (traditions or sayings of the Prophet Muhammad PBUH) and simple messages reminders do not impact the customers’ repaying their debts. Both Muslim and non-Muslim groups are primarily found in the non-moral group. Research limitations/implications This study does not consider socio-economic demographics and culture. This limitation calls future works to consider such factors when conducting a similar topic. Practical implications The industry professionals can take benefit from this study to understand the Indonesian customers’ moral status in repaying credit card debt. In addition, future works may advance the recent findings by considering socio-cultural factors to investigate the moral status approach to Islamic credit warnings that is not covered by this study. Social implications This work finds that religious text of credit card repayment reminders sent to Muslims in several provinces of Indonesia does not affect their decision to repay their debts. To some extent, this finding draws a social issue that the local IBs need to consider when implementing the strategy of credit card repayment reminders. Originality/value This study credits a novelty in the discourse of data science for Islamic finance practices. Specifically, this study pioneers an example of using data mining to investigate Islamic-moral incentives in credit card debt repayment.

EXPRESS: Minimum Payments Alter Debt Repayment Strategies across Multiple Cards

US Households currently hold $770 billion in credit card debt, often managing repayments across multiple accounts. We investigate how minimum payments (i.e., the requirement to allocate at least some money to each account with a balance) alter consumers’ allocation strategies across multiple accounts. Across four experiments, we find that minimum payment requirements cause consumers to increase dispersion (i.e., spread their repayments more evenly) across accounts. We term this change in strategy the dispersion effect of minimum payments and provide evidence that it can be costly for consumers. We find that the effect is partially driven by the tendency for consumers to interpret minimum payment requirements as recommendations to pay more than the minimum amount. While the presence of the minimum payment requirement is unlikely to change, we propose that marketers and policymakers can influence the effects of minimum payments on dispersion by altering the way that information is displayed to consumers. Specifically, we investigate five distinct information displays and find that choice of display can either exaggerate or minimize dispersion and corresponding costs. We discuss implications for consumers, policy makers, and firms, with a particular focus on ways to improve consumer financial well-being.

The effect of household wealth on financial debt after cancer diagnosis.

e18552 Background: Cancer is the 2nd most common cause of death in the country, eclipsed only by heart disease. Cancer care is increasingly characterized by financial toxicity related to high-cost treatments, though it is unknown whether other chronic conditions impose similar financial harms. Methods: We conducted a retrospective analysis of the Health and Retirement Study participants interviewed between 2012-2018. This is a national, longitudinal survey conducted every two years of adults 50 and older and their spouses. We used fixed effect regression models to compare changes in financial debt among households with new diagnosis of cancer, other major chronic conditions (diabetes, stroke, or heart disease), and no new health diagnosis (or health shock). Since more affluent households may respond to health shocks differently, we estimated separate comparisons for households above versus below median wealth in 2012, prior to new health conditions. We assessed use of any non-housing financial debt, credit card debt, and home equity lines of credit among the subset of homeowning households. Results: In this study of 14,153 households, average age at interview was 62 years, with 43% male, 70% White, 22% Black, 13% Hispanic, and 70% with up to high school education. Of this population, 25% held credit card debt, 70% owned a home, 18% had a home equity line of credit, and 9% used a home equity line of credit. Among households with below median wealth when they entered the study in 2012 ( < $23,000 in $2016), a new cancer diagnosis was associated with a 4.7 percentage point increase in financial debt (12.5% effect size, p < 0.05). Participants diagnosed with a chronic condition (heart condition, stroke or diabetes) were 3.6 percentage points more likely to develop financial debt (9.6%, p < 0.05) compared to households that did not develop a new chronic condition. Such differences were eliminated in participants in a house with above median wealth. There was no difference in credit card debt, availability of home equity line of credit, or use of home equity line of credit for participants with a new diagnosis. Conclusions: New diagnosis of cancer or a chronic condition were associated with increased financial debt for older Americans living in a household that were below median wealth.

Multidimensional credit attitude and credit card debt behavior in the United States

PurposeThe purpose of this study is to construct composite index variables of credit attitude using six attitudinal variables. This study also examines the relationship between consumer credit attitude and credit card debt behaviors.Design/methodology/approachThis study used the pooled dataset of the 2010 and 2013 Survey of Consumer Finances (SCF) released by the Federal Reserve Board. A total of 8,417 households were used as our analytic sample. The credit card indices were constructed using factor analysis with polychoric correlations. Factors of the credit card debt behaviors were estimated using hierarchical logistic regression models.FindingsThe results of factor analysis identified two credit attitude indices (wants and needs). The results of hierarchical logistic regression analyses show that the credit attitude indices have a positive influence on payment behaviors; households with more favorable attitudes about credit use for non-necessities (wants) were more likely to hold an outstanding credit card balance, have irregular payment practice and pay a revolving charge.Originality/valueAlthough there is ample documentation in the literature of credit behavior, the current literature is deficient in some areas for not addressing unobserved consumer attitudinal dispositions. Further, the separate treatment of selected survey items or an additive scale of survey items has been widely used; however, this approach cannot capture multidimensional characteristics among attitudinal items if credit attitude is not necessarily unidimensional. In response to the shortfall in the extant literature on credit card behavior, this study examined multidimensional aspects of credit attitude as a determinant of credit card debt behavior through methodological justification. Implications for future research and practitioners are provided.

Asymmetric Consumption Smoothing

Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive expected tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and is most consistent with a mental accounting life-cycle model. (JEL D12, E21, G51, H24, H31)