In our article, “Financial Knowledge, Confidence, Credit Use, and Financial Satisfaction” we investigate the associations between consumers’ confidence in their financial knowledge and their financial behaviors and financial satisfaction. We observe that in order for customers to use their financial knowledge when making credit card use decisions, they must be sufficiently confident in that knowledge.

Interestingly, confidence in financial knowledge helps customers make better credit card use decisions and exhibit a higher financial satisfaction even when their actual level of financial knowledge is low.  Additionally, financial knowledge has a positive effect on credit card use decision and financial satisfaction even when financial confidence is low, suggesting that knowledge and confidence are complements to increased healthy credit card use and financial satisfaction. For example, we see that 1-point increase in customers’ financial confidence and knowledge is associated with a decrease of 16% and 18%, respectively, in the probability of making only the minimum payments toward their credit card balance.

Our findings suggest that boosting people’s confidence in their financial knowledge may support their ability to engage in healthy financial behaviors by helping them gain and preserve the capability to be in charge of their personal finances.


Guest Contributor: Dorin Micu, University of Rhode Island

Read the full article in the Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019. Read a research brief on this and other financial satisfaction research HERE

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