Boston Fed, Report: Personality Traits and Financial Outcomes

“What determines consumers’ financial behavior? Can income and demographic attributes explain why some consumers have a bank account or a credit card while others do not, or why some credit cardholders revolve their balances while others diligently pay their debts every month? Using detailed data collected from consumer surveys, we find that while demographics and income play significant roles in explaining financial outcomes, so do the consumer personality traits known as the Big Five in the literature. When we control for income and demographics, the personality traits become insignificant in predicting whether consumers are unbanked or whether they hold a credit card. However, the traits remain significant in predicting whether cardholders revolve their credit card debt: Credit card adopters who are less conscientious, more open, or more agreeable are significantly more likely to carry unpaid credit card debt. Future research could test whether personality traits can help predict more troublesome financial outcomes, such as delinquencies or bankruptcies.”