Credit Card Usage behavior between Anglos and Hispanics.

Credit card ownership and use have accelerated over the past few years, with increases occurring in most demographic groups. For example, the share of households owning credit cards -- including bank-type cards (e.g., Visa) and retail company cards (e.g., Sears) -- rose by almost 3% between 1989 and 1992 and 5% between 1992 and 1995 (Kennickell & Starr-McCluer, 1994; Kennickell, Starr-McCluer, & Sunden, 1997). The growth in credit card ownership can be attributed to supply as well as demand factors (Garcia, 1980). On the supply side, credit card issuing organizations involving banks and large retailers have lowered their standards of ownership eligibility (Canner & Luckett, 1992). Local and regional banking institutions have relaxed eligibility standards for bank cards and have also increased their attempts to reach out to nontraditional cardholders, such as college students (Murdy, 1995) and minorities (Canner, Kennickell, & Luckett, 1995). On the demand side, a greater number of retail establishments have increased their acceptance of cards to pay for inexpensive essentials, such as groceries and gasoline, without surcharges (Goerne, 1992; Yeo, 1990). Also contributing to demands for credit cards are consumers' perceptions of greater convenience and social acceptability and easy access to cash money (Eastwood, 1975; Garcia, 1980; Hirschman, 1979; D. White, 1995).

The purpose of this study is to further explore the alleged differences in credit card usage between mainstream Anglos and minority Hispanics. To meet this goal, we first review the literature concerning credit card types and linkages between credit card usage and demographics. Then, we develop hypotheses resulting from the analysis of the literature. Next, we discuss the methods used to test these hypotheses. A sample of one U.S. Hispanic subgroup, namely Mexican Americans, is compared with a sample of Anglo-Americans. Mexican Americans constitute by far the largest representation of Hispanics in the United States, have the longest presence tradition in this country, and are the fastest growing minority group (Skerry, 1993). Finally, results and their discussion, along with recommendations for future research, are presented at the end of this article.

Credit cards have been classified from a consumer perspective in two main ways: (a) retail cards, which are exclusively used in retail stores, such as department stores and gas stations; and (b) bank cards, which are typically used for a general purpose, such as paying for entertainment or groceries (Garcia, 1980). Retail cards, also known as two-party cards, specialty cards, and private label cards, have been issued since 1914 by large department stores and gas station chains. Bank cards, or general purpose cards, provide a line of credit that consumers can use as they please to purchase goods and services from any merchant who accepts the cards (Garcia, 1980).

Although retail and bank credit cards provide cardholders with similar services, there are two important differences between them. First is the matter of convenience. Some studies show that cardholders perceive bank credit cards as more convenient, efficient, and widely honored and accepted than retail credit cards (Etzel & Donnelly, 1972; Schulz, 1993; D. White, 1995). Also, bank cards have national and international reach. In contrast, retail credit cards are limited to smaller geographic areas or domestic markets (Kaynak, Kucukemiroglu, & Ozmen, 1995; D. White, 1995). Retail cards are generally preferred by cardholders with low mobility and strong store loyalty (Schulz, 1993). Second, and more important, is the matter of borrowing. Issuers of bank credit cards have been gradually dropping finance charges relative to retail issuers. Annual percentage rates (APRs) have gone to such low levels that many cardholders have forgone more complicated (but predictable) methods of borrowing money, such as fixed-term personal loans (Schulz, 1993; D. White, 1995). There is growing evidence that bank credit card borrowing and charges have contributed to family financial problems, as reflected by a significant increase in personal bankruptcies (Brobeck, 1992).

Demographic characteristics of credit card owners appear to reflect issuer-imposed constraints and not a natural selection process. In other words, credit card issuers prefer to issue their cards to preselected groups of individuals. Not surprisingly, these individuals are typically upper income, educated, and in highly regarded occupations (Hirschman & Julander, 1979). Table 1 shows a summary of the key empirical studies on credit card user demographics characteristics, including education, income, age, and gender. These studies analyze the relationship between demographic variables and usage behavior. Education appears to be the most prominent in showing a strong positive relationship with credit card usage. Focusing on the bank credit card market, Canner (1988) found that the amount charged each month by both convenience and borrower users increased as education increased. Alternatively, Danes and Hira (1990) indicated that respondents with higher education and knowledge of consumer credit tended to use credit cards more often.

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Income is another demographic variable that researchers have found to have a positive relationship with credit card usage. Hirschman and Goldstucker (1978) divided bank card holder groups into holder/user and holder/nonuser groups and examined the differences between the two. They found that the holder/user group was more likely to earn higher incomes and to not necessarily belong to an upper-class social group. Alternatively, Wasberg, Hira, and Fanslow (1992) found a positive relationship between the amount of credit card debt and household net income. Although most authors have supported the notion that income is positively related to the use of credit cards, two studies have found that income does not have any significant effect on the usage of credit cards (Awh & Waters, 1974; Choi & DeVaney, 1995).

In contrast to education and income, age has shown a predominantly negative relationship with credit card use. For example, age was negatively related to the probability of using a credit card in K. J. White's (1975) study. Also, Wasberg et al. (1992) found a negative relationship between age and …