Holding and using credit cards in Mexico

Abstract

Mexico is an under-banked country where most people do not use the financial system. Bearing this context in mind, this research analyses which factors, such as household characteristics and access to banking infrastructure, influence Mexican families to hold and use a credit card. I use a two-stage selection model for the analysis and find that factors such as literacy, ethnicity and living in a rural area can affect, if not determine, a person’s access to credit cards. Additionally, I find that policies that seek to grow the network of Point-Of-Sales terminals can have a positive effect on the number of cardholders and card usage. Along the research I highlight the importance of having more and better data to analyse the credit card market in Mexico, in order to promote the adoption of this electronic means of payment, since the existing data is limited and has several important flaws.