Antecedents and Consequences of Risky Credit Behavior among College Students: Application and Extension of the Theory of Planned Behavior

Abstract

The Credit Card Act of 2009 reflects increased public policy concern about the risky credit behaviors of young adults. This act promotes increased responsibility of parents and implies that young adults must acquire financial knowledge and practice responsible financial behaviors. This study addresses this public issue by investigating the psychological processes underlying young adults’ risky credit card behaviors and the role of parents and financial knowledge in the financial behavior of young adults. A conceptual model based on an extension of the theory of planned behavior is proposed. The authors collected data from a sample of first-year students at a major public university. The results show that both parental norm and parental socioeconomic status are important factors that influence students’ risky credit behaviors. Furthermore, subjective financial knowledge does more to prevent risky credit behaviors than objective financial knowledge. Finally, behavioral intention is the most important factor in preventing risky credit behaviors and credit card debt accumulation. The authors draw on their findings to provide public policy implications.

Psychological determinants of financial buffer saving: the influence of financial risk tolerance and regulatory focus

“…Finally, the behavioural intention is seen as a key predictor of actual behaviour (Ajzen 1991(Ajzen , 2002Armitage and Conner 2001). The TPB has been validated in a wide range of domains (Ajzen 1991;Armitage and Conner 2001;Conner and Armitage 1998), including financial behaviours like budget keeping (Kidwell and Turrisi 2004), retirement saving (Croy, Gerrans, and Speelman 2010), saving habits (Loibl, Kraybill, and DeMay 2011), negative financial behaviours like not paying bills (Xiao et al 2011) and even future financial behaviours such as saving (Shim, Serido, and Tang 2012). However, it has not yet been applied to financial buffer saving.…”

“…Furthermore, knowledge about behaviour has little to do with actually performing it (Ajzen et al 2011). Subjective knowledge, however, has a greater impact on behaviour (Lusardi, Keller, and Keller 2009;Wang 2009;Xiao et al 2011). Since several TPB-based studies found that subjective financial knowledge predicts financial attitude (Croy, Gerrans, and Speelman 2010;Kidwell and Turrisi 2004;Xiao et al 2011), our model assumes that individuals with more subjective financial knowledge have a greater tolerance of financial risks.…”

“…Empirically, social norms influence financial behaviours like retirement saving (Croy, Gerrans, and Speelman 2010) and money management (Cude et al 2006). Furthermore, positive parental norms predict students' intention to perform financial behaviours like saving (Shim, Serido, and Tang 2012;Xiao et al 2011) and positive subjective norms also predict a stronger retirement saving intention (Davis and Hustvedt 2012). As such, subjective saving norms were added to the model as a predictor of saving intention: positive subjective saving norms are expected to predict a stronger saving intention.…”

“…This concept can be considered interchangeable with self-efficacy (see Ajzen 1991;Conner and Armitage 1998) Self-efficacy is an individual's perception of one's ability to perform a certain behaviour in dealing with a threat or challenge (Bandura 1977), and, when applied to the financial domain, the amount of control and ability one feels when dealing with money issues (Dietz, Carrozza, and Neal Ritchey 2003). Empirically, stimulating self-efficacy with an easy-to-follow saving plan increases saving behaviour considerably (Lusardi, Keller, and Keller 2009) and, in terms of TPB research, financial self-efficacy is a positive predictor of saving (Xiao et al 2011). The model therefore assumes that perceived financial self-efficacy influences saving intention and self-reported saving behaviour: individuals with a high financial self-efficacy are expected to have both a stronger saving intention and to report more saving behaviour.…”

Consumer Behavior of College Students in the Czech Republic

“…According to Xiao et al (2011), the main source of financing consumption in the last few years has been usage of credit cards and accessible overdraft accounts to cover expenditures. Having not only one credit card makes students owing.…”