What Accounts for Racial and Ethnic Differences in Credit Use?

Anti‐black currents in consumer affairs: An introduction to the special issue

“…Rather than overwhelm consumers with competing savings goals, tailor and time retirement savings messages to the moments when consumers are likely to have the bandwidth to pay attention and on priorities that they themselves have ranked hierarchically. Similar to Goodstein, et al (2021), these results point to the influence of unobserved factors in the marketplace, such as the effects of latent racism and discrimination as well as differences in the prioritization of homeownership (relative to retirement) for BIPOC households. Due to lower and less stable employment income, fewer assets, a lower incidence of homeownership, and lower home values (Perry, 2019), Black households not only have less to save, but must deploy these savings earlier than similarly situated White households due to more immediate priorities (O'Brien, 2012; Wherry, 2019).…”

“…Research in this special issue also exposes the impact of race in accessing credit products and retirement savings. Goodstein, et al's (2021) paper in this volume, “What Accounts for Racial and Ethnic Differences in Credit Use?,” compares the use of bank credit products (i.e., a credit card or a personal loan or line of credit) with nonbank forms of credit (i.e., a rent‐to‐own service or a payday, auto title, pawnshop, or tax refund anticipation loan) for Black versus White households. They find that Black and Latinx households are significantly less likely to use bank credit, and more likely to utilize more costly non‐bank forms of credit, even after controlling for the effects of income, education, and bank account ownership.…”