Men tend to have higher total credit limits than female borrowers, research finds

Personal Finance

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It’s no secret that there is a gender pay gap in the U.S.

Women earned just 84% of what men made in 2020, according to the Pew Research Center. Consequently, it would take female workers an extra 42 days to make the same income men did that year.

Now, research from the Federal Reserve Bank of Philadelphia points to another potential gap between genders with regard to total bank card borrowing limits.

An “unexplained gender difference in bankcard limits” of about $1,323 exists, with male borrowers having higher limits, the research found. That was after controlling for credit score, income and demographic characteristics.

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The research, which is based on data spanning 10 years, found the gap between the sexes fluctuated over time.

The difference between genders also varied by the size of consumers’ credit limits. For smaller limits, women tended to have the upper hand with regard to borrowing power. For higher limits, say $30,000 or $40,000, men tended to have access to more credit.

Women were also inclined to own more credit cards, but have lower average balances, the research found.

The research is based on data from sole mortgage applications, which have no co-applicants and therefore could be accurately separated by gender. Consequently, the results may not be indicative of all people with a credit card, said Nathan Blascak, research fellow at the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute.

Blascak co-wrote the research with Anna Tranfaglia, a community development research analyst at the Federal Reserve Bank of Philadelphia.

“We weren’t sure what the size was going to be,” Blascak said of the difference in credit limits between genders. “It ended up being relatively small, especially when you think about what the gender pay gap is.”

The reason for the difference is likely not based on biases from financial institutions, he added, due to the fact that credit offers are generally automatically generated.

The gender wage gap definitely plays a role in the discrepancies, though to what extent is still unclear, Blascak said.

It is possible that the discrepancy starts when men and women originate their first credit card, which sets initial limits, and then accumulates over time.

The research also found that there tend to be slight differences in the kinds of credit card mail offers that men and women receive. Women tend to receive slightly fewer offers than men, as well as different kinds of solicitations.

While surveys on gender experiences with credit cards and limits exist, this is one of the first research papers to apply large administrative data to try to answer the question of how men’s and women’s experiences differ, Blascak said.

“The hope is that this opens the door for other researchers to step in and start thinking about some of these questions,” he said.

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