After more than 28,000 men and women were surveyed, the research conducted by the FINRA Investor Education Foundation seems to link gender with financial literacy and the cost of credit. The results are astounding, if not unsettling, but speak a lot to the mindset of the average American consumer.
Although this report might be upsetting to read it is a fair indicator about the importance of something known as "financial literacy." Just as a person becomes more intelligent about various topics the more they read (think: politics, world events, the economy, etc), so can a person improve their financial well-being by improving their literacy of financial matters. All this survey really shows is that the average male consumer in America is, perhaps, a little more well-read then the average female consumer of similar age and means.
Looking more closely at the findings, of the respondents of low financial literacy:
- 32 percent of women were found to be actively and consistently engaged in poor credit behaviors vs. 29 percent of men
- Men being 6 percent more likely to pay back their balances in full
- Men being 6 percent more likely to comparison shop for better credit card offers
The survey data also indicated that women (in general) also seem to be paying, on average, a half a percentage point more than men in interest rates regardless of financial literacy. What is, perhaps, even more interesting is that the survey also found that among the respondents who showed a high level of financial literacy, gender was not a factor in credit behavior at all. To understand this, then, you first need to know what designates negative credit behavior. Negative credit behavior could be described as:
- Carrying a continuous balance on your credit card every month
- Making only the minimum required payment every month
- Accruing late fees
- Accruing other fees
These are things that occur all the time. Once in a while is not a habit and does not constitute poor behavior or irresponsibility, but if you notice that you are constantly paying fees or can only afford (or barely afford) your minimum monthly payment, you may need to reexamine your strategy. According to the survey and research, then, women are more likely to participate in these types of behaviors, but the basis for these behaviors is not certain. Obviously you cannot just attribute it to gender, but it might be related to social factors or emotional factors that simply have not been studied closely enough at the time of publication in order to draw a conclusion.
Of course, statistics are no good without analysis and analysis is no good without context. Fortunately, Gerri Walsh can put some of this in context. According to Gerri Walsh, president of FINRA (Financial Industry Regulatory Authority), the largest independent securities regulator in the United States:
For women, having a high level of financial literacy appears to pay off. The gender gap for costly credit card behaviors disappears for women with high levels of financial literacy, and after controlling for demographic characteristics like age and income. Becoming more financially literate is a great step that any woman can take to keep more of her hard-earned money in her pocket.
Unfortunately, the statistic regarding women lagging a half a percentage point behind men, regardless of financial literacy, seems to be a persistent one, even though there is no correlation. It is even more unfortunate, though, that no one seems to be able to identify the cause of this at all. Survey analysts are still unclear as to the reason for this and they do not dare speculate at this time, perhaps for fear of retaliation from sensitive consumers. However, it has been suggested that this statistic, somehow, accounts for the fact that women are more likely to acquire a retail credit card. Since these tend to carry higher interest rates (but relatively low balances), it could justify the offsetting of the basic analysis. Again, this is just speculation.
While there is still some speculation as the reason for some statistics, a recent survey shows that financial literacy seems to be associated with better credit behavior and that good financial literacy seems to be more oft attributed to male consumers than to females.