Credit Card as a Tool to Diminish Financial Constraints of the Low-Income

Farah Diba Abrantes-Braga, Insper Institute of Education and Research
Danny Claro, Insper Institute of Education and Research
Diogo Hildebrand, Baruch College
Manuela Dantas, The California State University

Award Amount: $1,500


Our study addresses credit usage by low-income consumers, and it investigates whether having access to credit could increase low-income consumers' well-being (or not). When any society faces financial constraints, the consequences for well-being are profound, but the low-income population is even more susceptible. Such consumers are neglected when it comes to the credit market. They are often victims of predatory lenders who charge high-interest rates and have no purpose in helping them other than profit. Yet, credit cards have become an essential part of consumer's life, and the lack of access to credit prevents them from improving their consumption. It might further perpetuate their poor economic condition. Past research on credit card use finds evidence of destructive financial consumer behavior. However, recent research on both literature, credit use, and financial constraints suggests otherwise. Grounded on these studies, we argue that having access to credit might reduce the financial constraints of the low-income population if adequately used; thus, credit cards may be a tool to improve the well-being of such consumers. We intend to answer the question: How does credit card use affect low-income consumers' overall well-being? No previous research (to the best of our knowledge) has studied the use of credit cards (actual behavior) by the low-income population. Our data collection will consist of two phases: study 1 will analyze the actual credit card behavior; study 2 will investigate causal relationships using online field and laboratory experiments. This research intends to offer insights into how marketing practices can prevent wrong credit usage and foster the low-income population's good use of credit. In addition, we contribute to reimagining marketing strategy, moving beyond profit, by ensuring that the vulnerable and women are empowered to make their expressive contributions in marketplaces.


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