Risk Tolerance and the Financial Satisfaction of Credit Card Users

The use of credit necessarily affects the financial risk faced by a household or individual. Credit cards are among the most commonly-used forms of credit. This paper tests whether risk tolerance has an effect on the financial satisfaction of an individual who uses credit cards. We find that credit-card mismanagement reduces individuals’ financial satisfaction, but only for those with low risk tolerance. We also find evidence that the non-monetary costs of credit card mismanagement, such as stress or anxiety, may be more impactful to individual dissatisfaction with credit-card use.