Based on a rich panel of household data, we investigate the determinants of the use of consumer
credit in Germany. We find that the usage frequency of an easily accessible, but relatively
expensive source of consumer credit decreases with financial literacy but is unrelated
to household income. This result is robust to household structure, age, formal education, and
occupational status. Based on childhood-related information on spending behavior, we control
for the influence of self- control on credit decisions. We document that neither self-control, nor
low numeracy drive out financial literacy when explaining the frequency of (expensive) credit
usage. Hence, financial education plays an important role to improve consumer choices.
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