What Accounts for Racial and Ethnic Differences in Credit Use?

50 Pages Posted: 2 Aug 2018

See all articles by Ryan Goodstein

Ryan Goodstein

FDIC Division of Depositor and Consumer Protection

Alicia Lloro

Board of Governors of the Federal Reserve System

Sherrie L.W. Rhine

Federal Deposit Insurance Corporation

Jeffrey Weinstein

Federal Deposit Insurance Corporation

Date Written: July 25, 2018

Abstract

Credit use varies widely among U.S. households; racial and ethnic differences are particularly striking. We examine whether household and residential-area characteristics can account for differences in use of bank credit (e.g., credit cards) and nonbank credit (e.g., payday loans). We use a novel dataset with information on previously unexplored factors, including income volatility, households’ attitudes toward banks, proximity to bank and nonbank financial providers, and neighborhood attributes. Although we account for much of the raw differences in credit use, residual racial and ethnic disparities are large. We discuss factors likely to be driving the residual disparities, and implications for policy.

Keywords: Consumer Credit, Banks, Nonbank Financial Institutions, Race and Ethnicity

JEL Classification: D1, G2, J1

Suggested Citation

Goodstein, Ryan and Lloro, Alicia and Rhine, Sherrie L.W. and Weinstein, Jeffrey, What Accounts for Racial and Ethnic Differences in Credit Use? (July 25, 2018). FDIC Division of Depositor & Consumer Protection Working Paper No. 2018-01, Available at SSRN: https://ssrn.com/abstract=3220050 or http://dx.doi.org/10.2139/ssrn.3220050

Ryan Goodstein (Contact Author)

FDIC Division of Depositor and Consumer Protection ( email )

550 17th Street, NW
Washington, DC 20429
United States

Alicia Lloro

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Sherrie L.W. Rhine

Federal Deposit Insurance Corporation ( email )

550 17th Street, NW
Washington, DC 20429
United States

Jeffrey Weinstein

Federal Deposit Insurance Corporation ( email )

550 17th Street, NW
Washington, DC 20429
United States

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