A Study into African Americans’ Credit Card Debt Problem

Literature Review: A Study into African Americans’ Credit Card Debt Problem
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Literature Review: A Study into African Americans’ Credit Card Debt Problem
Background of the Literature Review
Among young customers, using credit cards has become more widespread over time. A credit card was owned by a significant share of first-year college students in 2009, with half of that population having four or more. The need for debt is growing as people get older and are in a transitional period of life. In order to make more significant purchasing decisions, like mortgage or auto loans, building credit is a crucial financial step. Borrowing cards are a versatile form of unsecured credit for those with low incomes that they can use to meet their high consumption needs and keep their finances stable without having to put up collateral. It is a serious issue, though, that young adults cannot adequately manage their credit and are frequently persuaded by pushy financial firms to enter into dangerous credit arrangements (Noel et al., 2019). The Credit Card Accountability Responsibility and Disclosure Act of 2009, passed in the wake of the economic recession, increased entry hurdles for young people by introducing financial protections for credit consumers (Coviello et al., 2022). Convenience, the ability to make repeated financial purchases, rewards programs, and credit history building are a few of the key benefits of using credit cards for purchases. Although the U.S. credit card usage scores appear to be race-neutral, they are actually racialized and wealthy-perpetrated with a number of discrepancies. This report evaluates and synthesizes the evidence concerning African Americans’ credit card debt problem.
Literature Review: A Study into African Americans’ Credit Card Debt Problem
According to Yakoboski et al. (2020), over 44 million African Americans in the United States (U.S.) account for 13% of the country’s total population. African Americans make purchases amounting to $1.2 trillion annually, thus reiterating that they impact the economy significantly. Yakoboski and colleagues further note that African Americans lag behind in financial wellbeing compared to the rest of the U.S. population, particularly Whites. The authors blame the trends on financial illiteracy among African Americans, thus suggesting the need to improve financial practices and capabilities via enhanced financial literacy to benefit the Black communities who earn low incomes. Weller and Hanks (2018) noted that African Americans have persistently had less wealth than their White counterparts, as shown in exhibit 1 below. According to them, racial differences exist concerning debt, with African Americans typically having more costly debt – including student debt, credit card debt, and auto loans – compared to their White counterparts. Compared to the preceding generation, credit cards have significantly increased in popularity for household financing due to stagnant household incomes and a steady fall in people’s purchasing power (Pugliese et al., 2021). According to Seamster (2019), debt is conceptualized as a s...