A Study on African Americans’ Credit Card Debt Problem

A Study into African Americans’ Credit Card Debt Problem
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A Study into African Americans’ Credit Card Debt Problem
Background Information
Credit card use is increasingly essential for everyday use in the United States (U.S.). As we move from using cash, there is a growing need to evaluate contexts where these cards are used and by whom. Some of the main rationales for using credit cards to make purchases include convenience, opportunities to make over-time financial purchases, rewards, as well as building a credit history. The U.S. scores on the use of credit cards seem race-neutral, but practically it is racially and wealthy perpetrated with a series of gaps. Credit scores ignore primary factors such as utility and rent, leaving most African Americans without homes. A lack of good credit scores makes it hard to secure a house or borrow money. Contrary to white households, over half of African American families hold their wealth in real estate, making it inaccessible to solve financial emergencies. Exhibit 1 below illustrates a persistent and wide wealth gap between African American and White households, which incentivizes the former to seek credit card debt (Noel et al., 2019). In addition, home equity recorded significant devaluation linked to the real estate bubble collapse, culminating in an unnecessary loss in investments among African American households (Brown & Carbone, 2019). Credit cards have gained significant prominence for household financing over the previous generation as household incomes stagnated and individuals recorded a constant decline in purchasing capabilities (Pugliese et al., 2021). This draft proposal evaluates African Americans’ financial problems related to credit card debt. It is anticipated that amid challenging economic times occasioned by the Covid-19 pandemic, African American households would increasingly depend on credit cards to make purchases, despite the high-interest rates and other adverse ramifications related to debt financing (Shadowen et al., 2022).
Exhibit 1: Persistent wealth gaps between African American and White households.
Research Problem
According to Ruetschlin and Asante-Muhammad (2013), insignificant research efforts exist to establish how the lack of public safety net impacts African American appetite for credit card debt. The current research would investigate how credit cards fill in when private assets or public safety nets are unavailable, culminating in rising credit card debts to finance investment and other human capital (Shadowen et al., 2022). Household assets provide resources for families undergoing hard economic times, especially those aggravated by the Covid-19 crisis (The White House, 2022). Currently, African Americans are facing constraints regarding household incomes and assets, which could be attributed to the discrimination legacy in federal asset-building programs that ignore African Americans, with a ratio of one dollar in assets for every twenty dollars in Whiten ownership. Moreover, as mentioned earlier, the finding could be attributed to the structurally disproportionate unemployment among African American populat...