Credit card repayments in a Latin American country: a psychological perspective

Abstract

PurposeThis paper aims to analyze decisions about payment rates on credit card statements by using background factors and perceptions that indirectly influence beliefs, according to the theory of planned behavior.Design/methodology/approachSince legal and institutional frameworks and household financial surveys are heterogeneous among countries, household data on the Chilean economy is used as the starting point in this matter.FindingsThe probability that an individual chooses to pay amounts less than the total billing of their credit cards rises with essential variables related to perceived behavioral control. Being the head of the household, being younger, perceiving a high or excessive financial burden of debt and facing unfavorable and unexpected situations that divert the budget, among others, are relevant to repayment decisions.Originality/valueThe novelty of this article is that its psychological approach differs from the traditional focus of economic rationality regarding credit cards. The results are relevant for policymakers and financial regulators due to implications for household behavioral finance and means of payment.