Credit card ownership and usage behaviour in Saudi Arabia: The impact of demographics and attitudes toward debt

Received (in revised form): 4th March, 2007

Alhassan G. Abdul-Muhmin*
is an associate professor of marketing at the College of Industrial Management, King Fahd University of Petroleum & Minerals (KFUPM), Dhahran, Saudi Arabia. He has extensive teaching, research and consulting experience in Saudi Arabia and Norway. Prior to joining KFUPM, he worked as a teaching and research associate at the Institute of Marketing of the Norwegian School of Economics and Business Administration, Bergen, Norway, where he obtained both his Masters and PhD degrees. He regularly teaches marketing research, consumer behaviour and marketing management to undergraduate MBA and EMBA students. His research interests are in consumer information processing, consumer adoption of electronic technologies, industrial buyerseller relationships and customer relationship management. He has authored or co-authored articles in scholarly publications, including the Journal of Business Research, Journal of Consumer Psychology, Journal of Business and Industrial Marketing, Journal of Global Marketing, Journal of Education for Business, Business & Professional Ethics Journal, Journal of International Consumer Marketing, International Journal of Retail & Distribution Management, and International Journal of Bank Marketing. He has also presented papers at international scientic conferences, including the annual educators conference of the American Marketing Association.

Yakubu A. Umar
is an assistant professor of nance at the College of Industrial Management, King Fahd University of Petroleum & Minerals, Dhahran, Saudi Arabia. He has a PhD from the Victoria University of Manchester, Manchester Business School, UK. He also has a masters degree (MBA) in business administration from Florida International University, Miami, Florida, USA and a bachelors degree (BSBA) in quantitative management from the University of Florida, Gainesville, Florida, USA. He has contributed articles to several scholarly journals of international repute, and has co-authored a book on managerial economics. His areas of research include corporate and international nance, entrepreneurial and small business nance, capital budgeting, rm valuation, capital resource allocation, emerging and developing stock markets, diversication and privatisation, as well as engineering and managerial economics.

Abstract Because of the Islamic prohibition of interest, in Saudi Arabia, there has long been a debate about the acceptability of owning and using credit cards. Available industry statistics, however, suggest that card ownership and usage may be on the rise. In this study, we empirically examine the extent and nature of credit card ownership and usage in the country, and how these are impacted by consumer demographics and attitudes toward debt. Using data from a structured survey, we nd inter alia that credit card penetration in the country is relatively low, female Saudis are more likely than males to own the cards, card usage tends to be selective, attitude toward debt is a signicant determinant of card ownership but not usage behaviour, and evaluation of card attributes is fairly positive among cardholders. Theoretical, managerial, and public policy implications of the ndings are discussed. Journal of Financial Services Marketing (2007) 12, 219234. doi:10.1057/palgrave.fsm.4760074 Keywords Credit card ownership, credit card usage, credit card attitudes, attitude toward debt, credit card attributes, satisfaction with credit cards

INTRODUCTION
*Correspondence: Department of Management & Marketing, King Fahd University of Petroleum & Minerals, Saudi Arabia. Tel: + 966 3 860 4265; Fax: + 966 3 860 2544; e-mail: alhassan@kfupm.edu.sa

Credit cards are now an important and integral part of the nancial and payment systems of modern societies. They are used

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4,500,000

Total Credit Card Loans (000 SR)

4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 1998 Q1 1998 Q2 1998 Q3 1998 Q4 1999 Q1 1999 Q2 1999 Q3 1999 Q4 2000 Q1 2000 Q2 2000 Q3 2000 Q4 2001 Q1 2001 Q2 2001 Q3 2001 Q4 2002 Q1 2002 Q2 2002 Q3 2002 Q4 2003 Q1 2003 Q2 2003 Q3 2003 Q4 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2005 Q1 2005 Q2 2005 Q3

Period Figure 1 Growth in credit card loans in Saudi Arabia (19983Q 2005) Source: Saudi Arabian Monetary Agency. Available online at: http://www.sama.gov.sa/newreports/xls/quarterly/ section1/mon-13a.xls (Downloaded on 8th March, 2006). Note: SR is for Saudi Riyal (US$1 = SR3.75).

both as a convenient payment medium in place of cash and checks and as a means of obtaining short-term revolving credit. In some of the rich, economically developed countries of the world, credit card ownership is so widespread among consumers that penetration rates are approaching 100 per cent. In many parts of the developing world too, credit cards are becoming increasingly available. In Saudi Arabia, the credit card market has grown signicantly over the past decade. In the late 1990s/early 2000 period, the credit card market in the country was reported to be growing at about 160 per cent per year. In 1999, the annual volume of credit card transactions in Saudi Arabia was around SR 1.2bn ($328m), charged by 275,000 and 165,000 holders of Visa and MasterCard credit cards, respectively.1 In 2004, the gure doubled to stand at around SR 2.4bn ($640m).2 This trend is also reected in gures for bank credit card lending over the years (Figure 1). Outstanding card loans have more than doubled during the period from 1998 to 2005 to reach over SR 4bn at the end of

the third quarter of 2005. The market is expected to grow even further following Saudi Arabias recent accession to the World Trade Organization (WTO) and the expected liberalisation and opening up of its nancial markets. For a largely Islamic country like Saudi Arabia, these gures and growth rates are puzzling. As the custodian of Islams two major holy places, the country is viewed by many as an icon of Islamic societal organisation. The Quran is the basic law of the country, and it prohibits the payment and receipt of interest, a major component of modern credit card systems. It should, however, be pointed out that there are differing views on whether this prohibition of interest applies unequivocally to credit cards. On the one hand are those who argue that it is acceptable to own and use credit cards as long as one pays the full monthly balance due and therefore avoids paying interest on outstanding balances. On the other hand, there are some who believe that it is un-Islamic to own and use the cards, even if one avoids paying interest on

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outstanding balances. They argue that by obtaining a credit card, one is signing a contract expressing a willingness to pay interest, and it is irrelevant that one does not actually pay the interest. Accordingly, Saudis were generally sceptical about credit cards during the early years of their introduction into the country. But these gures seem to suggest that the trend is changing, and they raise the following important questions:
(1) Just how widespread is bank credit card ownership in Saudi Arabia? How does ownership vary across demographic segments of the population, and what is the role of attitude toward debt in explaining card ownership? (2) How do credit cardholders in Saudi Arabia use the products?

for card marketers in Saudi Arabia in their customer attraction and retention efforts. It will also help us understand how consumers in an Islamic country context relate to credit cards as they struggle to balance the necessity of owning them in the modern global nancial system with their religions prohibition of interest. In the next section, we review the extant literature on consumers credit card ownership and usage behaviour and derive hypotheses that guided the study design. Following this, we present the studys methodology. We then outline our analysis procedures and present the results. The results are discussed in a separate section. A nal section outlines some limitations of the study and suggests some directions for future research.

(a) For what purchase occasions do they use credit cards, what is the level of usage intensity, and how widespread is the tendency to revolve outstanding card balances? (b) How do consumer demographics, attitude toward debt, and number of cards owned impact on usage intensity and tendency to revolve?
(3) How do users evaluate credit card products in Saudi Arabia, and how do attribute evaluations impact overall evaluation of the cards?

LITERATURE AND HYPOTHESES In this section, we review the literature on credit card ownership and usage behaviour. Consistent with previous studies,4 we specically distinguish between ownership and usage, as credit card ownership is not synonymous with usage. We rst review the literature on credit card ownership, followed by that on credit card usage behaviour.

Credit card ownership Although credit cards are becoming increasingly ubiquitous in the global economy, there are still substantial variations in card penetration rates among countries. In general, penetration levels are higher for high-income developed countries,3 where per capita incomes and spending power are high, and infrastructure for processing electronic payments is highly developed and widely available. Even among countries at fairly similar levels of income and economic development, however, variations in penetration levels have been observed. For example, penetration rates are generally higher in the US compared to Europe and

The present study was conducted to answer these questions as they relate to bank credit cards in Saudi Arabia. It is a descriptive study that seeks to provide insights into credit card ownership and usage behaviour in the country. As suggested by Kaynak and Harcar,3 descriptive studies of this sort that provide information about who currently holds credit cards, the extent of their use, and how credit card users and nonusers differ in terms of demographics, socio-economic and attitudinal orientation provides greater insights into the credit card market in developing country markets (p. 27). Accordingly, the present study will be useful

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Japan.5 Similarly, although the income levels in Saudi Arabia and Qatar are fairly similar, Metwally reports that credit card penetration rate in Qatar is around 84 per cent,6 compared to 58 per cent for Saudi Arabia.7 Accordingly, descriptive studies of card ownership and penetration levels in specic national contexts can be traced in the literature.6,8,9 Within particular national contexts, researchers have also documented demographic differences in credit card ownership.8,1012 In general, the empirical evidence suggests that card ownership is positively related to income, education, and age, and males are more likely to own credit cards than females.3,4,13,14 The observed demographic differences have been attributed to the selective card issuance policies of nancial institutions, who specically target educated, middle- to highincome consumers as these are generally less likely to default in repayment.3 Saudi banks are just as selective in their credit card issuance practices. In fact, one may argue that they are even more selective. Until about ve years ago, almost all but one of the banks would not issue credit cards to expatriate workers without a Saudi guarantor. Therefore, we expect similar patterns of demographic differences, and gender differences should be even more pronounced as females constitute only 7 per cent of the Saudi workforce.15 In addition, given the Islamic stand on paying interest and the salience of this issue in discussions on the acceptability of owning credit cards, we expect card ownership to be higher among consumers who have positive attitudes toward debt. In total, therefore, we expect that in Saudi Arabia,

Credit card usage Consumers have different motives for holding credit cards. Some hold them for their convenience as a payment instrument,12,16,17 while others hold them as a means of obtaining revolving credit to nance consumption.18,19 These variations in motives affect the extent to which cardholders actually charge purchases to the cards, the intensity of such usage,4 situations in which the cards are used, and the particular products purchased.8 For this reason, researchers have been interested in understanding credit card usage behaviour in particular national contexts, and how this varies among different demographic and socio-economic segments.11,12,16,17,2024 Evidence of demographic differences in credit card usage can also be traced in the literature. With a few exceptions,25,26 the evidence suggests that usage intensity is positively related to education3,27,25 and income.3,4,28 On the effect of age, both positive25 and curvilinear relationships9 have been suggested. In the latter case, the evidence suggests that usage intensity is heavier among middle-aged consumers than lower- and old-aged consumers. In countries with multi-ethnic populations, ethnicity has also been found to have a signicant impact on credit card usage.12 It is, however, not possible to generalise the pattern of ethnic differences observed in any of these studies to the Saudi context. They only highlight the need to examine ethnic/ nationality differences in card usage in Saudi Arabia, especially given the relatively large non-Saudi segment of the population. This not withstanding, we expect usage intensity to be higher among Saudis simply because they are more likely to own credit cards. Two other variables that we expect to be related to card usage intensity are the number of cards owned and attitude toward debt. Intuitively, the number of cards owned should be positively related to usage intensity because the higher the number of cards, the

H1:

Credit card ownership will be positively related to income, education, age, and attitude toward debt; Saudis will be more likely to own credit cards than non-Saudis, and males will be more likely to own them than females.

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greater the opportunity to charge purchases to credit cards. A high number of cards owned also probably reects a more positive attitude toward credit cards, and therefore increased likelihood of using them in product purchase. On the effect of attitude toward debt, there is empirical evidence to suggest that this is also positively related to credit card usage intensity.4,17,29 In sum, then, the available evidence suggests that among credit cardholders in Saudi Arabia, H2: Usage intensity will be positively related to income, education, number of cards owned, and attitude toward debt; the relationship with age will be curvilinear; usage intensity will be higher among Saudis than nonSaudis; and higher among males than females.

present study were not examined in their study. However, Handelsman and Munson30 found that among US cardholders, the tendency to revolve is negatively related to education, and is higher among HispanicAmericans. In the present study, we expect similar patterns and hypothesise that among credit cardholders in Saudi Arabia, H3: The tendency to revolve will be negatively related to income, education, and age, and positively related to number of cards owned and attitude toward debt. NonSaudis will be more likely to revolve than Saudis, and males will be more likely to revolve than females.

Credit card attributes Compared to other payment media, a universal distinguishing attribute of credit cards is their ability to function as a source of consumer nancing.11 Within specic national contexts, an additional distinguishing attribute is the issuing source (the familiar distinction between bank and proprietary credit cards), and within particular card categories (eg bank credit cards), there are additional attributes that serve to distinguish one brand (issuer) from another. For example, bank credit card brands differ in the amount of interest charged, credit limits offered for comparable income groups, repayment conditions (eg minimum required monthly payments), presence or absence of membership fees, breadth of acceptability by retail outlets, and the nature and extent of customer liability in case of card loss. Accordingly, some previous descriptive studies have examined consumer perceptions of such attributes and how they impact the credit card choice decision.3,4,9,11,22,31 In Saudi Arabia, bank credit cards are the most dominant. All of the Kingdoms banks offer Visa and MasterCard products to their customers. However, despite the common franchising source for these products, there

Another usage-related variable of interest to researchers concerns how credit card users pay off their monthly balances the familiar distinction between revolving and nonrevolving card usage.18 Revolving (interest-paying) cardholders are those who carry forward outstanding balances by paying either only the minimum monthly amount due or slightly above that minimum. Nonrevolving users pay off the entire monthly amount due on their cards, and do not carry forward any outstanding balances. The exact proportion of revolving and nonrevolving users is a function of the economics of the particular credit card market being studied. In Saudi Arabia, however, where paying interest is a religiously sensitive issue, nonrevolving card holders are likely to be in the majority, using the cards mainly for their convenience rather than revolving credit benets. On demographic differences, Hamilton and Khan18 nd that tendency to revolve is negatively related to age, and positively related to card usage intensity and attitude toward buy now, pay later. Other demographic variables of interest to the

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are substantial differences among the cards on the attributes indicated above. As such, in the present study we also examined customers perceptions of these attributes as they pertain to credit card brands in Saudi Arabia. The descriptive nature of previous studies and the difculty of generalising evaluations from those studies across national contexts, however, preclude the formation of specic expectations and hypotheses for the Saudi market. Therefore, the study was designed simply to explore post hoc the nature of these perceptions and examine the relationship between these and satisfaction with credit card products in the country. METHOD Data for the study were collected through a bank-sponsored survey using a structured self-administered questionnaire. Respondents indicated, among others, whether they owned credit cards or not. Those who reported owning credit cards also indicated the number of cards owned, the brands (Visa, MasterCard, etc), and the issuing bank. They also answered a number of purchase-related questions, among which were the average monthly credit card purchases, their usual mode of paying off outstanding card balances, and their evaluations of selected attributes of the cards they own. The study targeted both Saudis and expatriates working in the country. According to the 2004 ofcial census data, expatriates comprise approximately 27 per cent (6.27 million) of the 22.67 million people living in Saudi Arabia. Although the majority of these are Arabs from other nations (notably Egypt), there are a large number of workers from the Indian subcontinent. Accordingly, English is the unofcial second language in the country, and the main language of commerce. As such, both Arabic and English versions of the questionnaire were distributed. The questionnaire was initially designed in English and later translated into Arabic using a unique procedure developed for the study.

Two groups of students of a marketing research class taught by one of the authors initially worked to produce two separate and independent Arabic translations. These were circulated to all class participants prior to a special class session held to discuss the translations. All the students are native Arabic speakers, but English is the language of instruction in the University, and students generally have a very high level of English prociency. This creates an ideal situation for group discussions of Arabic translations of material in English. The discussion itself proceeded on a question-by-question basis. For each question, the students examined the two translations and decided which one better reected the spirit of the English format of the questionnaire. Only after unanimous agreement was secured on a translation did the discussion move to the next question. In a few instances, the students felt that both translations were inadequate, and offered consensus alternative translations. The questionnaires were distributed using the drop-off/pick-up method of questionnaire administration.32 They were personally handed out to customers at banks, in shopping malls, and company ofces. This convenience sampling approach was used because of the difculty in obtaining probability samples in Saudi Arabia. Moreover, the authors experience with survey research in Saudi Arabia shows that convenience sampling methods like the above normally produce high response rates and lower item nonresponse. A total of 774 usable completed questionnaires formed the basis for the data used in the analyses. The realised sample is slightly biased toward males (67 per cent) and middle-income earning respondents (31 per cent have monthly incomes in the range SR5,000SR10,000). The dominance of males in the sample reects the difculty of reaching females for survey data collection in Saudi Arabia where there is a strict separation between the sexes, and males are generally not allowed to interact with

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nonfamily female members of the society. Almost 10 per cent of the sample consists of non-Saudi nationals. Although this per cent is below the population proportion, the presence of expatriates in the sample underscores the target of the study to include all consumers living in Saudi Arabia, not just nationals. Accordingly, the effect of their inclusion on the study results will be examined as needed. RESULTS Credit card ownership Around 63 per cent of the survey respondents reported owning at least one
Table 1 Demographic differences in credit card ownership

credit card. More than half of these report holding only one card, while a further 34 per cent report holding two cards. Thus, a clear majority of cardholders own a maximum of two cards. Demographic differences in card ownership were examined using two types of analyses. The rst involved separate individual chi-square analyses of the distribution of credit card ownership among gender, nationality, age, income, and education categories. The objective was to determine the independent effect of each variable on credit card ownership. The results are shown in Table 1. With the exception of nationality, all variables are signicantly related to credit card ownership. Specically, the incidence of credit card ownership

Number (Per cent) of respondents who Demographic variable Income Less than SR 1,000 SR 1,0004,999 SR 5,0009,999 SR 10,00014999 SR 15,00020,000 Above SR 20,000 Education High school & below Diploma College degree Other Agec 1825 years 2640 years 4150 years Over 50 years Nationality Saudi Non-Saudi Gender Male Female Attitude toward debt Good Good in some ways, bad in others Bad
a b c

Owna

Do not own

Chi-square 79.8294 (4 d.f.)

p 0.0000

15 (21.7%) 113 (50.7%) 165 (69.6%) 74 (67.3%) 53 (91.4%) 52 (92.9%) 51 (48.6%) 75 (67%) 312 (63%) 33 (80.5%) 128 (51.6%) 200 (64.1%) 112 (76.7%) 34 (73.9%) 434 (62.9%) 42 (60%) 344 (67.1%) 132 (53.4%) 63 (58.3%) 352 (64.9%) 59 (55.7%)

54 (78.3%) 110 (49.3%) 72 (30.4%) 36 (32.7%) 5 (8.6%) 4 (7.1%) 15.371 (3 d.f.) 54 (51.4%) 37 (33%) 183 (37%) 8 (19.5%) 28.095 (3 d.f.) 120 (48.4%) 112 (35.9%) 34 (23.3%) 12 (26.1%) 0.228(1 d.f.) 256 (37.1%) 28 (40%) 169 (32.9%) 115 (46.6%) 45 (41.7%) 190 (35.1%) 48 (44.9%) 13.205 (1 d.f.) 4.656 (2 d.f.) 0.000 0.097 0.633 0.000 0.002

Totals may not add up to the sample size of 744 due to listwise deletion of missing data SR is for Saudi Riyal (US$1=SR3.75)

Age categories in questionnaire were: (1) Below 20; (2) 2035; (3) 3650; (4) Over 50. Category (1) with only one respondent and category (4) with nine respondents were, respectively, added to categories (2) and (4) for analysis

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Table 2 Results of forward stepwise binary regression analysis of demographic differences in credit card ownership Independent variablea Gender Income (Less than SR 1,000)c Income (SR 1,000SR 4,999) Income (SR 5,000SR 9,999) Income (SR 10,000SR 14,999) Income (SR 15,000SR 20,000) Income(Over SR 20,000) Education (High School & Below)c Education (Diploma) Education (University degree) Education (Other) Constant
a b c

Bb 0.449 1.331 2.115 1.965 3.560 3.612 0.715 0.624 0.894 0.753

SE 0.177 0.338 0.341 0.373 0.563 0.613 0.301 0.241 0.516 0.173

Wald 6.456 75.289 15.497 38.458 27.770 40.009 34.737 8.108 5.638 6.721 2.999 19.010

d.f. 1 5 1 1 1 1 1 3 1 1 1 1

Sig. 0.011 0.000 0.000 0.000 0.000 0.000 0.000 0.044 0.018 0.010 0.083 0.000

Exp(B) 0.639 3.785 8.292 7.136 35.157 37.042 2.045 1.866 2.444 2.124

Variable(s) entered on: step 1 = Income; step 2 = Gender; step 3 = Education Variable coding: Card Ownership: 0 = Does not own, 1 = Owns; Gender: 1 = Male 2 = Females Indicates reference category

increases with age, income, and education, conrming the expectations in hypothesis H1. For gender, however, the direction of differences is contrary to expectations, as females are more likely to own credit cards than males. The second analysis involved estimating a multiple stepwise binary logistic regression model in which the dichotomous credit card ownership variable was the dependent variable while the demographic variables served as joint criterion variables. Walds method of the forward stepwise procedure was used, with probabilities of entry and removal set, respectively, at 0.05 and 0.1. The goal of this analysis was to ascertain the relative importance of each demographic variable in predicting credit card ownership. The results (Table 2) show that in order of importance, the determinants of credit card ownership are income, gender, and education, respectively. Age and nationality fail to enter the equation. Credit card usage Credit card usage was examined in terms of three usage behaviour variables card usage occasions, usage intensity, and tendency to revolve outstanding balances. On usage occasions, respondents were provided with a list of ten possible uses of credit cards

obtained through an initial exploratory focus group study. They were then asked to rank order the uses from 1 to 10 to indicate the relative importance of each use in their own decisions to sign up for a credit card. Usage intensity was conceptualised as the average monthly amount charged by users to their credit cards. This was operationalised as an open-ended question in which respondents with credit cards indicated the average amount they charged to their cards monthly. This operationalisation contrasts with Chans4, who used the number of times purchases are charged to the card as a measure of usage intensity. Finally, to determine tendency to revolve, respondents were asked to indicate how they typically settle outstanding monthly balances on their credit cards. Three response options were provided pay the full monthly amount due (indicating nonrevolving status), pay the minimum monthly payment required by the issuer, or pay an amount above the minimum but not the entire outstanding amount (the latter two indicate revolving status). Usage occasions The results of a frequency analysis of responses to the usage occasions question are shown in Table 3. The results show that for consumers in Saudi Arabia, the three major uses of credit cards are for international

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Table 3 Relative importance of credit card uses N 1. To use when you travel abroad 2. To gain access to additional liquidity from the bank 3. For use in emergencies 4. To be able to buy products on credit 5. To avoid carrying cash when you travel 6. To use in buying products from the internet 7. To use in ordering products from outside the Kingdom 8. To take advantage of discounts offered for paying with credit carda 9. To use in paying bills outside the Kingdom 10. Responding to an offer from the bank
a

Per cent ranking factor as most important (%) 55.5 55.2 44.5 42.4 41.2 25.2 26.2 23.3 17.3 12.7

344 194 283 151 257 123 103 86 81 71

Relevant for offers on dual branded cards or during joint promotions between card issuers and specic retailers

travel, in emergencies, and to obtain additional liquidity. Respondents were very selective in their answers to this question. For example, 344 respondents (or 72.2 per cent of credit card owners) chose to provide ranking data on the factor to use when travelling abroad. In contrast, only 71 respondents (a mere 14.9 per cent) of the card owners provided ranking information for the item to respond to an offer from the bank. This selectivity may itself be indicative of the relative salience of the different usage occasions. Usage intensity Three hundred and ninety-ve usable responses to the question measuring usage intensity were obtained. The average monthly credit card purchase for these was SR 2084.46 (US$555.86), with a standard deviation of SR 2,129.52 (US$567.87) and a range of SR 14,900 (US$3,973.33). The median was SR 1,500 (US$400), with a mode of SR 1,000 (US$266.67). Demographic differences in usage intensity were examined through six separate one-way analysis of variance analyses. In each analysis, usage intensity was the dependent variable and age, gender, nationality, income, education, number of cards owned, and attitude toward debt were the independent variables. Attitude toward debt was measured using a single-item question drawn from the US survey of consumer nances.17 This close-ended question asks respondents to

indicate which of three response options (good, bad, and Good in some ways, bad in others) best describes their opinions about installment payments. The results are shown in Table 4. The most signicant demographic determinants of card usage intensity are income, education, and age. Number of credit cards owned is also signicantly related to usage intensity while attitude toward debt is not, and remains to be so even when only respondents with clearly polarised answers (ie only Good or Bad) to the question on installment payments are included in the analysis ( 2 = 0.223; d.f.= 1; p = 0.637). In terms of specic directions, usage intensity increases monotonically with age, income, and number of cards, while the pattern of differences for education is mixed. There are no statistically signicant differences among Saudis and expatriates in usage intensity. Neither are the differences between males and females statistically signicant. It is noteworthy, however, that the average monthly purchase for females is numerically higher than for males. Tendency to revolve Frequency analysis of the question assessing tendency to revolve shows that, of the 460 respondents who answered this question, 68.3 per cent pay the full monthly amount due (ie they are nonrevolving cardholders) while the remaining 31.7 per cent carry forward their monthly balances either by paying the

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Table 4 ANOVA results Test of demographic differences in usage intensity ANOVA summary statistics Independent variable Income F-ratio F5, 385 = 17.213 p 0.000 Descriptive statistics for dependent variable (Average Monthly Credit Card Purchases) Groupa Less than SR 1,000a SR 1,0004,999bde SR 5,0009,999c SR 10,00014999bd SR 15,00020,000be Above SR 20,000abcde High school & belowad Diplomabcd College degreebcd Otheracd 1825 yearsabcd 2640 yearsabd 4150 yearsacd Over 50 yearsabcd Saudi Non-Saudi Male Female Onea Two Threea Four or more Attitude toward debt F2, 407 = 0.319 0.727 Good Good in some ways, bad in others Bad
a b

Nb 12 92 147 62 39 39 42 59 260 29 112 172 85 23 360 34 287 107 197 142 38 18 55 306 49

Mean 1108.33 1314.13 1702.72 2406.61 2721.79 4412.82 1591.67 1273.73 2157.69 3788.28 1394.29 2147.67 2385.88 4021.74 2117.53 1766.18 2000.03 2321.03 1803.55 2123.31 3081.58 2747.22 2008.18 2218.89 1909.18

SD 921.91 1094.50 1471.54 2131.40 2070.30 3845.93 1302.995 1095.144 2068.405 3792.491 1350.42 2074.21 2218.51 3581.77 2182.41 1475.39 2127.45 2134.79 1851.65 2059.03 3077.81 2485.28 2010.94 3158.13 1958.41

Education

F3, 386 = 10.493

0.000

Age

F3, 388 = 11.719

0.000

Nationality Gender Number of cards owned

F1, 392 = 0.844 F1, 392 = 1.771 F3, 391 = 4.642

0.359 0.184 0.003

For any pair of groups, similar superscripts indicate that the mean scores are signicantly different based on a Bonferroni test Totals may not add up to 395 due to listwise deletion of missing data

minimum amount due or slightly above the minimum (ie they are revolving customers). Further insight into the distinguishing characteristics of revolving customers was sought through univariate chi-square analysis in which revolvers were compared with nonrevolvers on the ve demographic variables included in the study (age, gender, nationality, income, and education), the number of cards owned, and attitude toward debt. The results of the chi-square analysis are shown in Table 5. At = 0.05, three of the seven independent variables (gender, education, and number of cards owned) have statistically signicant relationships with revolving status. Specically,

males are signicantly more likely to be revolvers than females (34.7 vs 24.2 per cent for females), respondents with lower levels of education (diploma and below) are signicantly more likely to be revolvers than those with higher education, and the tendency to revolve is signicantly higher among respondents with two or three cards (41.8 and 30.2 per cent, respectively) than among those with one or four cards (25.7 and 27.3 per cent, respectively). Thus the results for education suggest an inverted U-shaped relationship with tendency to revolve. Attitude toward debt is marginally signicant. However, when only respondents

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with clearly polarised answers (ie only Good or Bad) to the question on installment payments are included in the analysis (a total of 117 respondents), the relationship becomes highly signicant ( 2 = 4.19; d.f.= 2; p = 0.041). Tendency to revolve is signicantly higher among respondents who believe that installment payment is good (favourable attitude toward debt) than among those who believe it is bad. In sum, then, revolvers are more likely to be males with relatively lower levels of education who own two credit cards and have positive attitudes toward installment payments.
Table 5

Evaluation of credit card attributes In the questionnaire, respondents were provided with the credit card attributes shown in Table 5, and asked to indicate how they evaluate their current credit card on each attribute. A ve-point category response format was used (1 = Excellent, 2 =Very good, 3 = Good, 4 = Fair, 5 = Poor). The overall evaluation of the issuer was also elicited on a seven-point semantic differential scale (1 = Excellent, 7 = Poor). The means and standard deviations of the responses are shown in Table 6.

Demographic differences between revolving and nonrevolving cardholders Number (per cent) of respondents who are:

Demographic variable Income Less than SR 1,000 SR 1,0004,999 SR 5,0009,999 SR 10,00014,999 SR 15,00020,000 Above SR 20,000 Education High school & below Diploma College degree Other Ageb 1825 years 2640 years 4150 years Over 50 years Nationality Saudi Non-Saudi Gender Male Female Number of cards owned One Two Three Four or more Attitude toward debt Good Good in some ways, bad in others Bad
a b

Nonrevolversa 10 (71.4%) 70 (65.4%) 115 (70.1%) 45 (61.6%) 29 (61.7%) 40 (80.0%) 30 (60.0%) 39 (55.7%) 216 (71.8%) 24 (72.7%) 88 (70.4%) 134 (68.0%) 67 (62.0%) 22 (81.5%) 290 (68.9%) 23 (60.5%) 216 (65.3%) 97 (75.8%) 176 (74.3%) 92 (58.2%) 30 (69.8%) 16 (72.7%) 35 (56.5%) 235 (69.1%) 41 (74.5%)

Revolvers 4 (28.6%) 37 (34.6%) 49 (29.9%) 28 (38.4%) 18 (38.3%) 10 (20.0%)

Chi-square 6.252 (4 d.f.)

p 0.282

8.630 (3 d.f.) 20 (40.0%) 31 (44.3%) 85 (28.2%) 9 (27.3%) 4.354 (3 d.f.) 37 (29.6%) 63 (32.0%) 41 (38.0%) 5 (18.5%) 1.122 (1 d.f.) 131 (31.1%) 15 (39.5%) 4.714 (1 d.f.) 115 (34.7%) 31 (24.2%) 11.528 (3 d.f.) 61 (25.7%) 66 (41.8%) 13 (30.2%) 6 (27.3%) 5.082 (2 d.f.) 27 (43.5%) 105 (30.9%) 14 (25.5%)

0.035

0.226

0.289

0.030

0.009

0.079

Totals may not add up to 477 due to listwise deletion of missing data See note 2 to Table 1

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Table 6 Evaluation of credit card attributes among credit card owners Mean 1. International acceptability 2. Convenience in using the card 3. Acceptability in Saudi Arabia 4. Credit limit 5. Procedures when card is stolen 6. Security 7. Monthly repayment conditions 8. Service charges (interest) Overall evaluationa 1.75 1.91 2.32 2.50 2.67 2.69 2.77 3.14 3.25 SD 0.92 0.97 1.19 1.13 1.21 1.26 1.10 1.20 1.41

Table 7 Regression results for effect of credit card attributes on overall evaluation (only credit card owners) Beta (Constant) 1. Service charges (interest) 2. Monthly repayment conditions 3. Credit limit 4. Acceptability in Saudi Arabia 5. International acceptability 6. Convenience in using the card 7. Procedures when card is stolen 8. Security 0.169 0.172 0.067 0.193 0.027 0.034 0.153 0.191 T 0.490 3.593 3.704 1.542 4.250 0.599 0.691 3.102 4.079 Sig. 0.624 0.000 0.000 0.124 0.000 0.549 0.490 0.002 0.000

a Measured 7-point scale (1 = Excellent, 7 = Poor); all other items are measured on a 5-point scale (1 = Excellent, 5 = Poor)

The eight attributes are ordered from the lowest (most positively evaluated) to the highest mean. International acceptability and usage convenience are the most positively evaluated credit card attributes. Relative to the other attributes, they also have the lowest standard deviations, indicating substantial agreement in evaluations among respondents. Not surprisingly, monthly repayment conditions and service charges (interest rates) receive the lowest evaluations. Additional insights into the data were sought by examining the relative contributions of each of the attributes to respondents overall evaluations of their credit card issuers. This was achieved through a multiple regression analysis procedure in which overall evaluation was the dependent variable and all the eight attributes were simultaneously entered as independent variables. The results shown in Table 7 are quite insightful. Five of the eight attributes have statistically signicant positive relationships with overall evaluation. These are service charges (ie interest rate), repayment conditions, domestic acceptability, security, and procedures when the card is stolen. Credit limit, international acceptability, and usage convenience do not have signicant impacts on overall satisfaction. Interestingly, of these three insignicant factors, convenience and international acceptability were the most favourably evaluated attributes.

Overall model statistics: F (8, 406) = 30.936; R-square (Adj. R-square) = 0.383 (0.371)

DISCUSSION The results of the present study show that around 63 per cent of the respondents report owning at least one credit card. In a previous study of electronic payment systems, 58 per cent of the consumers in Saudi Arabia reported owning at least one credit card.7 Compared with the present results, this suggests a growth in penetration of around 7 per cent within the past eight years. Although this is a healthy growth gure for a previously credit card-sceptical society like Saudi Arabia, the current penetration rate is still much lower than the penetration rate of 75 per cent for the US5 or 84 per cent for Qatar.6 Interestingly, however, the penetration rate of 63 per cent for Saudi Arabia is exactly the same as the 1977 penetration rate among American households,23 corroborating Kaynak and Harcars3 suggestion that developing country consumers, at the moment, are at a similar level of credit card development as was the USA in the 1970s and 1980s (p. 26). From a managerial point of view, this implies that there are still signicant opportunities for card issuers to increase credit card penetration in the Saudi market. From a public policy point of view, this could provide some indication of possible

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future developments in the burden of credit card debt among consumers in Saudi Arabia. Household credit card debt is currently a big issue in the US, and if card penetration in Saudi Arabia continues to grow and eventually reach the current levels in the US, it is reasonable to expect similar levels of household credit card debt burdens as currently obtains in the US. Among credit card owners, the majority of respondents (52.0 per cent) report owning only one card, a further 33.7 per cent report owning two cards, 9.2 per cent have three cards, and 5 per cent report having four or more cards. These gures are fairly similar to those for Qatar, which are, respectively, 54.0, 27.8, 12.7, and 5.5 per cent.6 Analysis of demographic differences in card ownership reveals patterns that are also similar to what has been reported in the extant literature. Credit card ownership in Saudi Arabia is found to be positively related to income, education, age, and attitude toward debt, and the directions of differences are consistent with the extant literature. However, contrary to previous ndings, the probability of card ownership in Saudi Arabia is higher among the female population. This result would be very surprising, especially for many who know that Saudi society is very conservative, and women play an obscure role in public life. Indeed, as discussed in the literature review section, females constitute only 7 per cent of the Saudi workforce. As such, one would not expect them to hold credit cards, let alone to be signicantly more likely than men to be cardholders. Interestingly, however, in a previous study of barriers to online shopping lack of credit card as a barrier to online purchase was less salient for female Saudis than for males.33 This reinforces the present nding that females are more likely to hold credit cards than males. Ironically, a possible explanation for this unexpected result may lie in the very fact that Saudi society is conservative. Islamic principles require that men be completely

responsible for the sustenance of women. Adherence to these principles implies that girls are entitled to parental care until they get married (irrespective of the age at which they marry). Upon marriage, their husbands have full responsibility for their nancial needs. Additionally, shopping is a major pastime and a signicant source of entertainment for women in Saudi Arabia. The men know this, and feel obliged to ensure that their wives and daughters are able to engage in this pastime with the minimum possible hindrance. Accordingly, most middleto high-income Saudi families have an extra car or cars with a driver to take the family out shopping while they are at work. It appears from the results of this study that providing the female members of the household with a credit card may also be another way to facilitate this Saudi female pastime. Thus, the cards seem to be playing an unexpected role of facilitating the participation of women in the economy. On credit card usage, the present results show that among cardholders, average monthly credit card purchases amount to about SR 2,084 (ie about US$ 550). This is about the same level of usage intensity for the US in the 1980s.3 Also in the present study, usage intensity generally increases with income, education, age, and number of cards owned, although there are minor irregularities for education and number of cards owned. In broad terms, these ndings again compare well with the results reported in previous studies.3,23 Attitude toward debt is not signicantly related to usage intensity, suggesting that cardholders have similar attitudes toward debt irrespective of how intensely they use the cards. Around 32 per cent of the cardholders in Saudi Arabia can be classied as revolvers. Compared to what has been reported in the literature, this gure is relatively low, and indicates a lower incidence of revolving behaviour among cardholders in Saudi Arabia. The Islamic prohibition of paying interest may explain this nding. As indicated in the

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introductory section, consumers who abide strictly by this prohibition, but nevertheless feel the need to hold credit cards, strive to avoid paying interest by not revolving their credit card balances. To some extent, Figure 1 lends some credibility to this explanation. We note from the gure that for any year, outstanding credit card balances typically peak during Q2 (the summer vacation period) and decline sharply afterwards in Q3. It appears that most consumers strive to pay off their card balances immediately upon return from their summer vacations, possibly to avoid paying interest as suggested in the discussion above. On demographic differences, the tendency to revolve is signicantly higher among males and respondents with relatively lower education. The relationship with number of cards owned is curvilinear, with those who own two cards being the most likely to revolve. Although directionally, these relationships do not compare directly with those of previous studies, 18 they conrm the general view in the literature that demographic variables have the ability to discriminate between revolving and nonrevolving credit cardholders. On the other hand, the positive effect of attitude toward debt on tendency to revolve is consistent with previous studies.17 The study respondents have identied international acceptability and usage convenience as the most positive features of their credit cards. Monthly repayment conditions and service charges (interest rates) obtain the most negative evaluations. Overall evaluations are found to be fairly positive but signicantly related to evaluations of service charges (ie interest rate), repayment conditions, domestic acceptability, security, and procedures when the card is stolen. Credit limit, international acceptability, and usage convenience do not have signicant impacts on overall evaluations, although convenience and international acceptability were the most favourably evaluated attributes. A possible reason for this may be that in

Saudi Arabia, credit cards have generally been positioned as products that offer convenient, safe, and secure alternatives to carrying cash during international travel. Thus, consumers may have internalised these attributes to such an extent that they no longer serve to differentiate one card from another. Consequently, they play no role in the overall evaluations. From a managerial point of view, the implication is that credit card issuers can no longer differentiate their products on these dimensions. Rather, differentiation opportunities appear to exist mainly through service charges, repayment conditions, and security. Domestic acceptability is also an important determinant of card evaluations. However, the problem with this is that no card issuer can singularly resolve it or use it as a basis for differentiating its offers from the competition. It is a problem faced by the credit card industry as a whole. Almost ten years ago, Abdul-Muhmin7 reported a widespread practice whereby some retailers charge credit card-paying customers a higher price than those paying cash, ostensibly to compensate for the transaction charges that issuers levy on retailers. Unfortunately, this practice still persists. LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH Although the present results offer some interesting insights into the credit card ownership and usage behaviour of consumers in Saudi Arabia, there is still room for future studies to improve our understanding of other aspects of this behaviour. One potentially interesting issue that the present study has not examined relates to where (domestic vs international), and on what products credit card purchases by Saudi consumers are consummated. This is a particularly useful issue to examine, given the anecdotal evidence that Saudis mostly use their credit cards during international travel and to pay for online purchases.

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A related issue is the exact nature of consumers attitudes toward credit cards, and how these vary among different demographic sections of the population. The present study has cited some anecdotal evidence to the effect that such attitudes are changing. The single question on opinions toward installment plans lends some support to this assertion as a signicantly large proportion of respondents believe that it is good (13.3 per cent) or good in some ways, and bad in others (74.3 per cent). But this is not a denite and comprehensive measure of attitudes toward credit. Future studies providing a more indepth examination of such attitudes using multi-item measures are needed. These studies could also measure consumers level of religious conservatism to ascertain whether this impacts on their attitudes toward debt. If possible, it would also be useful to plan such studies longitudinally, so that any future changes can be clearly identied. Part of the recent growth in Saudi Arabia\s credit card market has been attributed to the advent of online shopping. Further work to examine where and on what products most credit card purchases by Saudi consumers are consummated (ie whether domestically or internationally) is needed. Finally, replication and extension of this study in other Islamic country contexts would add to a deeper understanding of how consumers in the Muslim world deal with the struggle to balance the necessity of owning them in the modern global nancial system with their religions prohibition of interest. ACKNOWLEDGMENTS The ndings reported in this paper are part of results from a larger study funded under the CIM Accreditation Fund grants of King Fahd University of Petroleum and Minerals (KFUPM), Dhahran, Saudi Arabia. The authors acknowledge KFUPM for the support, and for the use of its various facilities in the research and preparation of this manuscript.

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