Study reveals gender gap in credit card limits for mortgage applicants
A Federal Reserve study by Nathan Blascak and Anna Tranfaglia reveals a persistent, though economically small, gender gap in bankcard credit limits for sole mortgage applicants. Male borrowers typically have $1,300 higher total limits, primarily driven by differences in the upper tail of the distribution.
Male borrowers hold higher credit limits
A study by Nathan Blascak and Anna Tranfaglia, drawing on linked mortgage application and credit bureau data, documents significant gender differences in total credit card limits for sole mortgage applicants.
The research estimates that male borrowers typically have approximately $1,300 higher total credit card limits compared to their female counterparts.
This disparity is not uniformly distributed across the credit limit spectrum; it is primarily driven by a substantial gender gap observed in the right tail of the limit distribution, indicating that men are more likely to receive exceptionally high credit limits.
In contrast, at the median and within the left tail of the total limit distribution, women's limits are found to be marginally higher, ranging from approximately $100 to $300 more than men's.
This suggests a complex pattern where the overall average is skewed by large differences at the higher end, while women show a slight advantage in the lower and middle ranges of credit limits.
Observed characteristics explain most of the gap
The study utilized a Kitagawa-Oaxaca-Blinder decomposition to dissect the factors contributing to the observed gender gap in credit limits.
The analysis indicates that a significant 87 percent of the gap is explained by differences in the effect of observed characteristics.
This suggests that how financial attributes are weighted or influence credit limit decisions varies by gender, rather than solely by the characteristics themselves.
A smaller proportion, 10 percent of the difference, is attributed to actual differences in the levels of observed characteristics between male and female borrowers.
The research further notes that this gender gap remains persistent across diverse geographies, indicating a broad-based phenomenon.
While persistent, the gap has also shown variation over time, with recent trends suggesting a shift that has favored women.
Despite these documented disparities, the authors emphasize that the overall economic magnitude of these gender differences is small.
Nuanced findings, limited economic impact
This paper offers a granular look into credit limit disparities, moving beyond simple averages to reveal a complex interplay of factors.
While the findings are methodologically robust, the authors' conclusion about the 'small economic magnitude' suggests the practical implications for policy intervention might be limited.
It provides valuable data for understanding systemic biases, yet the overall impact on financial inclusion may not be as pronounced.