scholarly journals Does the visual salience of credit card features affect choice?

2021 ◽  
pp. 1-18
Author(s):  
Matthew D. Hilchey ◽  
Matthew Osborne ◽  
Dilip Soman
Keyword(s):  
Interest Rates ◽  
Random Sample ◽  
Credit Card ◽  
Credit Cards ◽  
Salient Feature ◽  
The Other ◽  
Visual Salience ◽  
Product Features ◽  
Hypothetical Scenario

Abstract Regulators require lenders to display a subset of credit card features in summary tables before customers finalize a credit card choice. Some jurisdictions require some features to be displayed more prominently than others to help ensure that consumers are made aware of them. This approach could lead to untoward effects on choice, such that relevant but nonprominent product features do not factor in as significantly. To test this possibility, we instructed a random sample of 1615 adults to choose between two hypothetical credit cards whose features were shown side by side in tables. The sample was instructed to select the card that would result in the lowest financial charges, given a hypothetical scenario. Critically, we randomly varied whether the annual interest rates and fees were made visually salient by making one, both, or neither brighter than other features. The findings show that even among credit-savvy individuals, choice tends strongly toward the product that outperforms the other on a salient feature. As a result, we encourage regulators to consider not only whether a key feature should be made more salient, but also the guidelines regarding when a key feature should be displayed prominently during credit card acquisition.

scholarly journals Credit Card Rates and Consumer Switch: New Evidence

2016 ◽  
Vol 8 (12) ◽  
pp. 95
Author(s):  
Omar A. Abdelrahman
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Credit Card ◽  
Percent Level ◽  
Empirical Finding ◽  
Credit Cards ◽  
Credit Card Market ◽  
The Ohio State University ◽  
Using Data ◽  
Level Of Significance

This paper investigates the underlying determinants of consumer’s choices regarding switching credit-card balances. To estimate the likelihood that consumers switch credit cards, two logit models are estimated. Using data from the Consumer Finance Monthly (CFM) of The Ohio State University, the author finds that at the conventional 5 percent level of significance, the following variables have significance: old interest rate, new interest rate, duration of the introductory rate, balances, number of credit cards, homeownership, and age. As expected, interest rates, balances, the duration of new introductory offer rates, and homeownership have the greatest influence on why or why not people switch credit cards. The findings are consistent with the view that consumers make rational decisions in the credit card market, challenging Ausubel’s (1991) argument of credit card consumer irrationality and Calem and Mester’s (1995) empirical finding that credit card rates are sticky because consumers are irresponsive to rate cuts.

scholarly journals The COVID-19 Shock and Consumer Credit: Evidence from Credit Card Data

2021 ◽  
Vol 2021 (008) ◽  
pp. 1-55
Author(s):  
Akos Horvath ◽  
◽  
Benjamin Kay ◽  
Carlo Wix ◽  
◽  
...  
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Negative Impact ◽  
Consumer Credit ◽  
Credit Cards ◽  
Sharp Decrease ◽  
Main Driver ◽  
Credit Card Data ◽  
Pandemic Severity ◽  
The Impact

We use credit card data from the Federal Reserve Board's FR Y-14M reports to study the impact of the COVID-19 shock on the use and availability of consumer credit across borrower types from March through August 2020. We document an initial sharp decrease in credit card transactions and outstanding balances in March and April. While spending starts to recover by May, especially for risky borrowers, balances remain depressed overall. We find a strong negative impact of local pandemic severity on credit use, which becomes smaller over time, consistent with pandemic fatigue. Restrictive public health interventions also negatively affect credit use, but the pandemic itself is the main driver. We further document a large reduction in credit card originations, especially to risky borrowers. Consistent with a tightening of credit supply and a flight-to-safety response of banks, we find an increase in interest rates of newly issued credit cards to less creditworthy borrowers.

scholarly journals RISK ADJUSTMENT OF THE CREDIT-CARD AUGMENTED DIVISIA MONETARY AGGREGATES

2018 ◽  
Vol 23 (S1) ◽  
pp. 90-114 ◽  
Author(s):  
William A. Barnett ◽  
Liting Su
Keyword(s):  
Number Theory ◽  
Risk Aversion ◽  
Interest Rates ◽  
Credit Card ◽  
Credit Cards ◽  
Microeconomic Theory ◽  
Index Number ◽  
Index Number Theory ◽  
Representative Consumer ◽  
Demand Deposits

While credit cards provide transactions services, as do currency and demand deposits, credit cards have never been included in measures of the money supply. The reason is accounting conventions, which do not permit adding liabilities, such as credit card balances, to assets, such as money. However, economic aggregation theory and index number theory measure service flows and are based on microeconomic theory, not accounting. Barnett et al. derived the aggregation and index number theory needed to measure the joint services of credit cards and money. They derived and applied the theory under the assumption of risk neutrality. But since credit card interest rates are high and volatile, risk aversion may not be negligible. We extend the theory by removing the assumption of risk neutrality to permit risk aversion in the decision of the representative consumer.

The relationship between credit card attributes and the demographic characteristics of card users in China

2016 ◽  
Vol 34 (7) ◽  
pp. 966-984 ◽  
Author(s):  
Christopher E.C. Gan ◽  
David A. Cohen ◽  
Baiding Hu ◽  
Minh Chau Tran ◽  
Weikang Dong ◽  
...  
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Credit Cards ◽  
Structured Interview ◽  
Application Process ◽  
Content Type ◽  
Explanatory Variables ◽  
The Impact ◽  
The Relationship ◽  
Different Levels

Purpose The purpose of this paper is to investigate the impact that several of these factors have on a consumer’s decision to hold a credit card, as well as those involved in determining the level of credit card limit. Design/methodology/approach Potential explanatory variables were identified in the literature, then used to build a binary logit model to test the impact of the card and consumer characteristics on credit card ownership. Data were collected via a structured interview of 409 consumers living in Hebei Province, China. Findings The results indicate that convenience in use, level of credit card interest rates, the application process, number of people in the household, a rewards programme, marital status, credit limit and age influence the likelihood of the respondent holding a credit card. Further, an anaylsis shows that the number of credit cards held, duration of holding a credit card, monthly credit card purchasing volume and having a degree at the tertiary level, are significantly and positively related to different levels of credit limit. Originality/value In summary, in order to attract more consumers to credit card use, the banks and credit card companies should consider making it more convenient for consumers to use their credit cards. Moreover, banks can increase their networking and degree of cooperation with merchants to increase the acceptance of payment by credit card. The most heavily used businesses such as supermarkets and smaller retailers, where consumers purchase goods frequently, would be good targets for banks’ attention. In addition, banks might also improve credit card reward programmes to make these more efficient and perhaps increase the size of the rewards customers can earn through card use.

scholarly journals The Usage of Credit Cards: An Empirical Analysis on Turkish College Students

2019 ◽  
Author(s):  
Aslı Okay Toprak ◽  
Canan Özge Eğri ◽  
Güldenur Çetin
Keyword(s):  
University Students ◽  
Credit Card ◽  
Financial Risk ◽  
Adult Life ◽  
Credit Cards ◽  
The Other ◽  
Full Time ◽  
Financial Responsibility ◽  
Negative Results ◽  
Credit Card Usage

In recent years, there has been a dramatic increase in the number of credit card usage among university students. Credit cards can be a convenient payment tool that gives university students a number of advantages and benefits to learn financial responsibility when it can be used in a controlled and responsible manner. On the other hand, using credit cards also have serious financial consequences when mismanagedly used. The excessive credit card debt and overdue payments give burden on university students’ shoulders before starting their full-time jobs. Besides that, when the other debts such as education credits are added, inevitable stress and anxiety make negative impacts on their newly started adult life. Also, lack of experience on using credit cards and personal financial information, tend to put some students at a higher financial risk due to a large and perhaps unmanageable debt burden. Therefore, rising number of students who use credit cards increases the concern for these long-term negative results of the credit card. In this context, we aim to evaluate the basic demographic and socio-economic factors that affect the attitudes of Kırklareli University students towards credit card ownership, credit card usage, and to evaluate the students' ability to manage their financial situation.

Shariah compliant credit cards: Disputes and steps forward

2018 ◽  
Vol 6 (1) ◽  
pp. 44 ◽  
Author(s):  
Zaimy Johana Johan
Keyword(s):  
Credit Card ◽  
Research Work ◽  
Credit Cards ◽  
Basic Needs ◽  
The Other ◽  
Key Features

The major studies on Islamic credit card (ICC) started in 2011 until 2013 specifically examining operations and structures of ICC and behavioural studies.  The other studies mostly explored and investigated behaviour and intention to utilise ICC.  There are however, few studies comparing between ICC and conventional credit card (CCC) preference.  On the same note, only a small number of studies have explored the importance of shariah compliance in influencing the behaviour of ICC adoption.  Since shariah compliant credit cards are not popular as compared to the conventional ones, it is timely to review the breadth and depth of ICC studies in order to acknowledge the existence of the product in the market.  Whether the product has been unattractive, lack of marketing and promotion from the bankers’ part or the public’s ignorance, insensitivity and unconsciousness about the products, the paper will provide an overview of the research work that has been conducted thus far.  The studies on ICC are still limited in numbers and the focus areas are only skewed towards behaviour, satisfaction and the structure of the cards.  The key features of ICC that differentiate the product with CCC still remain invisible and unnoticed.  There is a critical need to further investigate another perspective of ICC by identifying the key features of shariah compliance and leverage on the benefits to consumers by protecting and preserving basic needs as well as promoting healthy banking environment. 

scholarly journals Bankruptcy Reform and Credit Cards

2007 ◽  
Vol 21 (4) ◽  
pp. 175-199 ◽  
Author(s):  
Michelle J White
Keyword(s):  
Interest Rates ◽  
Consumer Protection ◽  
Credit Card ◽  
Credit Cards ◽  
The United States ◽  
Abuse Prevention ◽  
Bankruptcy Law ◽  
Personal Bankruptcy ◽  
Consumer Protection Act ◽  
Bankruptcy Policy

From 1980 to 2004, the number of personal bankruptcy filings in the United States increased more than five-fold, from 288,000 to 1.5 million per year. By 2004, more Americans were filing for bankruptcy each year than were graduating from college, getting divorced, or being diagnosed with cancer. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law. It made bankruptcy law much less debtor-friendly. Personal bankruptcy filings fell to 600,000 in 2006. This paper explores why personal bankruptcy rates rose, and will argue that the main reason is the growth of “revolving debt”—mainly credit card debt. It explains how the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 altered the conditions of bankruptcy. Finally, this essay considers the balances that need to be struck in a bankruptcy system and how the U.S. bankruptcy system strikes these balances in comparison with other countries. I argue that a less debtor-friendly bankruptcy policy should be accompanied by changes in bank regulation and truth-in-lending rules, so that lenders have a greater chance of facing losses when they supply too much credit or charge excessively high interest rates and fees.

scholarly journals Bank Revolving Credit as a Channel of Monetary Policy Targeting Interest Rates

2021 ◽  
Vol 13 (2) ◽  
pp. 147-160
Author(s):  
MUJTABA ZIA ◽  
◽  
JENNIFER LOGAN ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Instrumental Variable ◽  
Credit Card ◽  
Credit Cards ◽  
The United States ◽  
Federal Funds ◽  
Federal Funds Rate ◽  
Consumer Loans ◽  
Revolving Credit

This paper investigates the implication of bank revolving credit in the form of credit card loans as a channel of monetary policy targeting the federal funds rate since 1980. Credit cards have become increasingly popular and a necessity for many transactions and purchases in the United States. The revolving credit nature of credit card loans makes them an instant tool for consumer loans that can facilitate consumption. Using instrumental variable and two-stage least squares (2SLS) methodology, we analyze the implication of credit card loans to modern monetary policy that targets interest rates.

Linking satisfaction to credit card decisions: an application of the Wallet Allocation Rule

2017 ◽  
Vol 35 (2) ◽  
pp. 205-219 ◽  
Author(s):  
Lerzan Aksoy ◽  
Timothy L. Keiningham ◽  
Alexander Buoye ◽  
Joan Ball
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Scientific Literature ◽  
Credit Cards ◽  
Credit Union ◽  
Retail Banking ◽  
Allocation Rule ◽  
Content Type ◽  
Key Driver ◽  
Key Drivers

Purpose The purpose of this paper is to identify the key drivers of share of wallet for credit cards issued by either a credit union (CU) or bank using a Wallet Allocation Rule (WAR) framework. Design/methodology/approach A survey approach engaging 1,649 current CU members at nine CUs regarding their use of 3,487 different credit cards is employed. Binary logistic regression is used to discriminate when CU issued vs bank issued credit cards are perceived to be “best” by their owners. Findings This research indicates the key drivers differ significantly when CU members prefer a CU-issued credit card vs a bank-issued credit card. For example, CU-issued credit cards are attractive to some CU members because of prior relationships with the CU and offering lower interest rates on revolving balances. By contrast, customers who choose a bank-issued credit card are much more likely to be driven by the rewards offered on the card. Practical implications Using the WAR key driver approach, managers can identify differentiating attributes that influence customers’ perceptions of their rank vis-à-vis competition and thereby grow share. Originality/value This research provides a significant contribution to both the banking literature and the scientific literature by examining the robustness of a relative metrics approach within the retail banking and CU market. It represents the first empirical analysis of a WAR key driver approach in the scientific literature.

Consumers‟ Acceptance of „Halal‟ Credit Card Services: An Empirical Analysis

2015 ◽  
Vol 3 (1) ◽  
pp. 51 ◽  
Author(s):  
Zaimy Johana Johan ◽  
Lennora Putit
Keyword(s):  
Perceived Control ◽  
Credit Card ◽  
Credit Cards ◽  
Product Knowledge ◽  
Key Factors ◽  
Developing Nation ◽  
Business Transactions ◽  
Factors Influencing ◽  
Financial Credit ◽  
Survey Questionnaires

Many past researches have been carried out in an attempt to continuously understand individuals‟ consumption behaviour. This study was conducted to investigate key factors influencing consumers‟ potential acceptance of halal (or permissible) financial credit card services. Specifically, it anticipated the influence of attitude, social influences and perceived control on consumers‟ behavioural intention to accept such services. In addition, factors such as religiosity and product knowledge were also postulated to affect consumers‟ attitude towards the act of using halal credit cards for any retail or business transactions. Using non-probability sampling approach, a total of 500 survey questionnaires was distributed to targeted respondents in a developing nation but only 220 usable feedbacks were received for subsequent data analysis. Regression results revealed that religiosity and product knowledge significantly influence consumers‟ attitude toward using halal credit card services.  Attitude in turn, subsequently has a significant impact on consumers‟ intention to accept halal financial credit card services. Several theoretical and managerial contributions were observed in this study.   

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