The Normalisation of Credit/Debt in the US by EDHEC Professor, Lisa Peñaloza

Written on 24 October 2011.

Liza Penaloza

Why did you choose this topic?

 Several years ago, before the financial crisis, Michele and I set out to investigate consumers' use and mindset regarding credit and debt. At that time it was quite common to see various real estate developments - malls, shopping centers, and ever larger houses at the same time earnings for the middle class remained rather flat. We'd also noticed that banks were soliciting students with credit cards at the university where I was teaching at the time, the University of Colorado. And there was a lot of attention in the media about credit scores and what one could do to improve their score. 

My research looks at the market place as a culture and I thought that credit and debt would be a valuable topic of study.

What are the main findings of the research?

As you know, since the financial crisis, we've heard a lot about Americans using many credit cards and their level of debt. Since we conducted this research before the crisis, we are able to generate some insight into how those parts of the crisis related to consumer credit and debt have come about. Qualitative research is typically conducted with a small sample, which makes it possible to go into much depth and understanding regarding how people use and think about credit and debt. This particular study consisted of depth interviews and home observations with 27 middle class consumers in the US. We sought to compare those in different age groups, those in their twenties, thirties, forties, fifties and sixties to document age related and generational differences in people's access and use of credit and debt. Those in the fifty and sixty-plus age groups are much more conservative than younger people in their twenties and thirties, partly because they were not able to access credit and debt in the way it was accessible up until two years ago. People now in their fifties and sixties also used credit and debt differently when they were young; it was something "only for emergencies," and not something to be used every day, as is now quite common.  

We noted that people made distinctions between "good" and "bad" debt. Informants defined good debt as debt from which you could generate a return.' This might be a student loan or a house mortgage, with the return being a better job or an increase in the value of the house over time, for example. We also noted that people worked their credit and debt. By this we mean that people were using both credit and debt to get a better credit score, and with a better score they were able to access more credit and debt to use for a house, for a car, etc. Even though some people remained cautious about the use of credit and debt, they noted that having credit, even being in debt has become normal - something "everybody does." Credit and debt have also become the norm - something people should do, to get a car, a house, the things they "have to have." Not having a credit card was considered abnormal. You can't travel, get an apartment or phone, or even have electricity without it.

Were you surprised by these findings?

I was quite surprised by some of the results. Certainly a credit score has become a "must" in American society. Another key point is how people make sense of their credit and debt. Some of them do think about interest rates, but at the same time they still take out credit and have debt with high interest rates because doing so produces meanings important to them. These meanings can include being independent, being a good parent, bonding with others, even distinguishing themselves from other people. And yet what is most critical is what making these meanings does to people, in the sense of how such meaning-making positions them in different ways of being a consumer. Some consumer positions are efficacious and competent in using it to make important meanings. But then some meanings lead to compromised, even punished positions. We suggest that people can learn to better use credit and debt, if they understand the meanings they produce with financial products and how the meanings they produce in turn position them as consuming subjects. Managing meaning is a different skill just as important as learning about interest rates. Such meaning management is also potentially valuable to professionals as an innovative way to measure consumers' credit risk.

How does your research impact the courses you teach to EDHEC students?

This research provides a good example to students of the use of qualitative methods for understanding consumers. I can point to the way firms draw from the meanings consumers make to include these meanings in advertisements and other marketing strategies. Perhaps most importantly, students can appreciate the way of thinking regarding credit and debt in the U.S., and how both have come to be considered normal there. As mentioned previously, the distinctions people make between "good" and "bad" debt is a key turning point in the normalization of credit and debt. Informants considered credit and debt "good" when they could imagine some future earnings to both. And yet with the recession, in a more difficult job market and with decreasing housing prices, such optimism in "working" credit/debt is more difficult to sustain. So credit is good, in the sense that getting a good credit score is important to people to provide them with access to further credit for a house or car, especially for young adults, but too much credit can be bad when it turns into debt.

Do you see a correlation between US credit/debt consumer patterns and European or French consumers?

That's an interesting question. In the four years I've been at EDHEC I do see banks becoming more aggressive in marketing credit in France. But to my knowledge French people do not consider credit use to be normal in the same way, nor are the laws the same. If people here in France have a credit card, it is most likely is a debit card that is secured by the money they have in their bank account. So if people don't have money in the account, they can't use the card. But please understand my research with coauthor Michelle Barnhart (Oregon State University) was carried out in the U.S. The trend in the U.S. is for young adults to use debit cards, but the use of unsecured credit cards is still quite common, and this is what one of our informants, Haley (age 32) meant when she said, "Credit is the American Way."  Investigating credit use in France would be a great topic for a MSc marketing thesis!

Find the research here.


About the Authors:


Lisa Peñaloza, Ph.D in Administration (University of California - Irvine) is Professor of Marketing at EDHEC Business School where she teaches qualitative research methods and consumer culture. Current projects explore the use of qualitative research in public policy on credit/debt, the impacts of remittances in Mexican families, and the resistance to market adaptation among foreign companies in emerging markets. Previous projects examined the production of cultural traditions and memories by ranchers and consumers at a western stock show, and the mutual adaptation of Mexican immigrant consumers in the U.S. with the marketers who do business with them. Her research has been published in journals including the Journal of Consumer Research, Journal of Marketing, Consumption, Markets and Culture, Public Policy and Marketing, International Journal of Research in Marketing, Marketing Theory, Journal of Strategic Marketing, and the International Journal of Sociology and Social Policy.


Michelle Barnhart is assistant professor of marketing, College of Business, Oregon State University. She graduated from the University of Utah with a Ph.D. in Business Administration in 2009. She also holds a Bachelor's Degree in Biology from Stanford University. Her research has been published in the Journal of Consumer Research and in the Journal of Business Research. Professor Barnhart teaches classes in Personal Selling and Principles of Marketing. Prior to her academic career, Barnhart worked for eight years in sales, customer service, and operations management in the personal emergency response industry, and for two years as a research scientist in a molecular neurobiology lab.

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