Research On Consumer Revolving Credit And Petty Installment Use

With the emergence of credit, credit consumption is prevalent. However, bankruptcy occurred in United State, credit crisis broken out in Korea, Credit slaves emerged in Taiwai, are all rotted in credit use. Garman and Forgue (2004) indicated that revolving credit and installment use induced credit card debt in America and Europe. According to a report on the behavior of credit card holders in 2008, 20.5% of credit card holders use revolving credit and 10.3% use petty installment. The TGI index2 for revolving credit users in Shanghai, Guangzhou and Beijing is 130, 108 and 44 respectively. Meanwhile, the TGI index for petty installment user is 132, 118 and 63 respectively in Shanghai, Guangzhou and Beijing. So, there are signs of credit debt on the horizon.Financial behavior researchers have paid attention to consumer credit debt behavior right now. Majority of studies have investigated the credit debt amount, but they ignored exploring the two behaviors which induced credit debt. In present paper, we symmetrically investigated credit debt behavior from psychological and behavior aspect through three studies. In study 1, we used the data from a commercial bank to analyze real behavior of revolving credit use and petty installment use. In study 2, we divided factors which influenced revolving credit use and petty installment use into four categories- demographic, attitude, personality, credit card related features according to traditional marketing research. We explored the between and within effect of these four kinds of factors. In study 3, we used SEM to test the mechanism of individual traditionality and modernity on credit debt behavior. Through this study we displayed that value transfer to some extent was the main reason for credit debt (Katona 1975; Leigh-Pemberton, 1989; Rittzer 1995; Zuckerman 2000). Meanwhile, we found that attitude factors played as completed mediator.TStudies were conducted using mail-in questionnaires, which were sent to credit card holders who are using or have used either revolving credit or petty installment. From statistic analysis such as correlation analysis, exploratory factors analysis, stepwise regression analysis, SEM and Heckman two-stage model, the results of our empirical study were as follows:1. Real behavior analysisThrough the data from a commercial bank, we found that the factors influencing whether use revolving credit, petty installment were different from the factors influencing the intensity use of revolving credit, petty installment. Age, the square of age, credit limit, credit rank, risk rank, gender, the length of holding credit card, the amount of consumption were correlated with use or not use revolving credit, but credit limit, the square of credit limit, gender, the length of holding credit and the amount of consumption were related with the intensity of use revolving credit. It was interesting that it was the first time to find that the square of credit limit was correlated with the intensity of revolving credit use. In other words, it meant that the relationship between the intensity of revolving credit use and credit limit was nonlinear. We found that it was a U shape. Compared with the number of factors influencing revolving credit use, there were limited factors can account petty installment use. Age, the square of age, credit rank, risk rank and gender were related with use or not use petty installment use. Only age and the times of use petty installment were correlated with the amount of petty installment use. We found that each petty installment average was 1300-1400.Age was the only factors can explain these four dependent variables. As hypothesized, age was curvilinearly related to revolving credit and petty installment use. If the other variables were set at their mean values, the probability of being a revolving user increased until age 37, then decreased with age, which supported by previous literature (Kim and Devaney, 2001).Meanwhile, consumers intended to use petty installment to buy durable products or electronic products. At the same time, Newegg, TV shopping was becoming new channel for petty installment use.All in all, we found that the extant data from commercial bank can account whether consumer use revolving credit or petty installment rather than the intensity of revolving credit and petty installment use. So it was necessary to investigate the factors which influenced the intensity of revolving and petty installment.2. Factors influencing the intensity of revolving credit useIn demographic factors, gender, age, income, social class and family life cycle and professor were all correlated with the intensity of revolving credit use. We also found that the intensity of revolving credit use was closely related to the following attitudes (ordered by importance): behavior attitude dimension of credit attitude, prestige-power dimension of money attitude, debt attitude, affective attitude, cognitive attitude dimension of credit attitude and retention dimension of money attitude. For personality factors, self-control, self-esteem, self-efficacy, defer gratification, internal control and impulsiveness were significantly correlated with the intensity of revolving credit use. For credit card features, we found that credit limit, the length of holding credit card and the number of owning credit cards was significantly correlated with the intensity of revolving credit use.Meanwhile, we found that these four kinds of factors had different impact in explaining the intensity of revolving credit use. Attitude factors were most powerfully factors in explaining the intensity of revolving credit use, which accounted for almost 82% of variance of the intensity of revolving credit use. Personality factors and credit card features factors accounted 58.8% and 7% of variance of the intensity of revolving credit use respectively. Least explanatory were demographic factors, which can only account less than 7.9% of the intensity of variance of revolving credit use. 3. Factors influencing the intensity of petty installment useIn demographic factors, gender, age and family life cycle were significantly correlated with the intensity of petty installment use. For petty installment use, significant attitudes overlapped but also diverged from those connected to the intensity of petty installment: risk and profit balance dimension of risk attitude, debt attitude, retention dimension of money attitude, behavior attitude and cognitive attitude dimension of credit attitude. For personality factors, sensation seeking, impulsiveness and defer gratification were correlated with the intensity of petty installment use. We also found that some of credit card features were easily to generate"illusion of income"and facilitate petty installment use.Also we found that these four kinds of factors had different impact in explaining the intensity of petty installment use. Attitude factors were most powerfully factors in explaining the intensity of petty installment, which accounted for almost 42% of variance of the intensity of petty installment use. Personality factors and credit card features factors accounted 16.9% and 6% of variance of the intensity of petty installment use respectively. Least explanatory were demographic factors, which can only account less than 4.3% of variance of the intensity of petty installment use.4. Comparison revolving credit use and petty installment useWe found that the impact of revolving credit use and petty installment use on the credit debt were quite different. To some extent, we can say that consumers regarded petty installment use as a kind of invest, so they paid attention to profit and risk related problems, whereas revolving credit use demonstrated consumers'habit, which was an unconscious behavior or obliged behavior. This hypothesis supported by previous literature. Garman and Forgue (2000) indicated that consumers used installment use completely depended on their asset and future income. In contrast, revolving credit debt always attributed to falsely evaluate their future financial situation.5. Mechanism of credit debt based on individual traditionaliy and modernityWe found that individual traditionality and modernity had great impact on credit card debt behavior. The whole process was completed by attitude factors. Specifically speaking, the higher one scored on traditionality, the lower one scored on prestige-power dimension of money attitude and debt and the higher one scored on retention dimension of money attitude and cognitive dimension of credit card attitude. In contrast, the higher one scored on modernity, the higher one scored on prestige-power dimension of money attitude, affective and behavior dimension of credit card attitude, debt attitude and the lower one scored on retention dimension of money attitude and cognitive dimension of credit card attitude.Present research was the exploratory research on credit debt in China. It has contributed a lot in theory and practical aspect. Meanwhile, we also put forward some interesting future directions.