Overconfidence in the Credit Card Market

2016 ◽  
pp. 150-168
Author(s):  
Susan Kriete-Dodds ◽  
Dietmar Maringer
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Trading Volume ◽  
Credit Card Debt ◽  
Agent Based ◽  
Credit Card Market ◽  
Income Expectations ◽  
Credit Card Usage ◽  
Payment Credit ◽  
The U.S

High credit card debt default has been symptomatic for the U.S. and other countries in the last decades. Different explanations for this situation exist in the literature. One explanation is overconfidence, which has become a key concept in behavioural economics for explaining anomalies in financial markets such as excessive trading volume. There is also the idea that overconfidence is to blame for high credit card debt. In this paper, an agent-based model is presented that examines the effects of overconfidence on credit card usage. Overconfidence is used here to explain why people who never intend to borrow on their credit card(s) do so anyway. The model contains consumption, two means of payment (credit card and cash), and a distortion to agents' income expectations via overconfidence. It was found that overconfidence leads to more “accidental” borrowing and higher interest rates.

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.

Credit Solicitations as Market Experiments in the U.S. Credit Card Industry

2017 ◽  
pp. 1-5
Author(s):  
Nabil Al-Najjar ◽  
David Besanko ◽  
Roberto Uchoa
Keyword(s):  
Interest Rates ◽  
Selection Bias ◽  
Credit Card ◽  
Risk Profile ◽  
Average Risk ◽  
Credit Reporting ◽  
Credit Score ◽  
Typical Experiment ◽  
Market Experiments ◽  
The U.S

Describes market experiments conducted by a major credit card issuer. In a typical experiment, the issuer sends out hundreds of thousands of solicitations based on information received from credit reporting agencies (e.g., credit score, past delinquencies, etc.). Selection bias is striking: the average risk profile of those responding to higher interest rates is significantly worse than that of respondents to lower rates. Tracking respondents for 27 months after the experiment, respondents to higher rates displayed significantly higher delinquency and bankruptcy rates. Based on a research paper by Larry Ausubel.

Downward stickiness of interest rates in the Australian credit card market

2013 ◽  
Vol 19 (1) ◽  
pp. 52-65 ◽  
Author(s):  
Abbas Valadkhani ◽  
Sajid Anwar ◽  
Amir Arjomandi
Keyword(s):  
Interest Rates ◽  
Credit Card ◽  
Credit Card Market

scholarly journals An Investigation Into Credit Card Debt Among College Students

2011 ◽  
Vol 1 (4) ◽  
pp. 43
Author(s):  
Dylan Williams ◽  
Brian Waterwall ◽  
Tiffany Giardelli
Keyword(s):  
College Students ◽  
Market Share ◽  
Credit Card ◽  
Credit Card Debt ◽  
Large Group ◽  
Usage Patterns ◽  
Credit Card Usage ◽  
E Mail ◽  
Outstanding Loan

It is no surprise that the amount of credit card debt and outstanding loan balances of college students is increasing every year. College students are heavily targeted by credit companies through the use of e-mail, campus booths, and standard mail. The reason for these solicitations is because of the soaring expense levels of college students and the potential that such a large group has to add profits to the issuing firm. Marketers are interested in credit card usage of students to determine the best methods for gaining market share in this emergent market. Credit card and loan usage patterns of college students are investigated.

The Effects of the COVID-19 Shutdown on the Consumer Credit Card Market: Revolvers versus Transactors

FEDS Notes ◽  
2020 ◽  
Vol 2020 (2792) ◽  
Author(s):  
Robert Adams ◽  
◽  
Vitaly Bord ◽  
Keyword(s):  
Credit Card ◽  
Consumer Credit ◽  
Credit Card Market ◽  
Revolving Credit ◽  
The U.S

The consumer credit card market has experienced dramatic, unprecedented changes in the wake of the COVID-19 shutdown of the U.S. economy. Revolving credit in the G.19 Consumer Credit statistical release fell by an annualized rate of 32 percent in the second quarter of 2020.

scholarly journals Tight Money And Loose Credit In An Open Economy

2011 ◽  
Vol 5 (4) ◽  
Author(s):  
Michael Cosgrove ◽  
Daniel Marsh
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Open Economy ◽  
Credit Card ◽  
Far East ◽  
Federal Funds Rate ◽  
The Far East ◽  
Time Period ◽  
Bank Reserves ◽  
The U.S

<p class="MsoNormal" style="text-align: justify; margin: 0in 34.2pt 0pt 0.5in;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">The U.S. Federal Reserve has been following a tight money policy, defined by growth in the quantity of money compared to nominal GDP growth since the first quarter of 2004. The Fed has also increased the federal funds rate 17 times in a row by August 8, 2006. Normally, this degree of tightening would be reflected in a slowing of real economic activity by mid-2006, with subsequent lowering of inflation pressures. Yet evidence of a slowdown only materialized in the second quarter of 2006. The housing sector illustrated signs of softening as the inventory numbers started to rise. Are there different factors influencing the effectiveness of monetary policy in this tightening cycle from prior tightening cycles in the Greenspan era? Our thesis is that the linkage between money and credit has become weaker in this cycle. Money appeared to be tight over the relevant time period, while credit was loose. Normally the two move in the same direction &ndash; when monetary policy tightens, credit conditions also tighten. But that didn&rsquo;t occur until very late in the tightening cycle, as credit remained plentiful. Long term interest rates remained low, compared to prior tightening cycles over the cycle. This divergence, in the assessment of the authors, is due to three factors: 1) an increase in monetary base velocity, 2) large net inflows of capital into the U.S., in particular from the Far East &ndash; Japan and China, and 3) the expansion of the markets for securitized assets. Rising incomes and high saving rates in the Far East combined with a relaxation of international capital controls resulted in a flood of savings washing up on America&rsquo;s shores. The securitization of bank-originated assets&mdash;originally home mortgages, but now including auto finance loans and credit card debt&mdash;has loosened the link between bank reserves and the level of credit in the economy.<span style="mso-spacerun: yes;">&nbsp; </span>These factors combined to explain why credit is loose in the U.S. while money appeared tight. A U.S. economy with these characteristics explains in part why the connection between domestic money policy and credit market conditions has been weakened.</span></span></p>

Compulsive Buying Behaviour of Credit Card Users and Affecting Factors Such as Financial Knowledge, Prestige and Retention Time: A Cross-sectional Research

2021 ◽  
pp. 097226292098142
Author(s):  
Rahul Khandelwal ◽  
Ashutosh Kolte ◽  
Nitin Veer ◽  
Pratik Sharma
Keyword(s):  
Retention Time ◽  
Financial Stability ◽  
Credit Card ◽  
Compulsive Buying ◽  
Financial Knowledge ◽  
Affecting Factors ◽  
Cross Sectional ◽  
Credit Card Market ◽  
Buying Behaviour ◽  
Credit Card Usage

A leading concern in client and vender relations is that the rising new situation of influence deploying of the credit card market. This situation is accountable for compulsive buying, which has disapprovingly exaggerated consumers, leading to impossible debt levels. Financial counsellors search for why and how individuals get themselves into financial debt. Compulsive buying behaviour and credit card could have a powerful effect on consumers’ financial stability. Further, in place of comprehending credit card usage and compulsive buying, this study correlates them with wealth attitudes such as power-prestige, financial knowledge and retention time. A cross-sectional descriptive research design using convenience sampling and non-probability sampling with quota samples of 313 credit cardholders was surveyed. The outcome showed that those with power-prestige money attitudes are likely to have free usage of credit cards through compulsive spending. Results also showed that those with a higher financial understanding have lower compulsive spending off the credit card.

Literature Study –Data Mining Techniques on Detecting Fradulent Activities in Credit Card

2017 ◽  
Vol 6 (10) ◽  
pp. 60
Author(s):  
S. K. Saravanan ◽  
G. N. K. Suresh Babu
Keyword(s):  
Data Mining ◽  
Credit Card ◽  
Data Transfer ◽  
Study Data ◽  
Time Requirement ◽  
Literature Study ◽  
Data Mining Techniques ◽  
Online Transactions ◽  
Secured Data ◽  
Credit Card Usage

In contemporary days the more secured data transfer occurs almost through internet. At same duration the risk also augments in secure data transfer. Having the rise and also light progressiveness in e – commerce, the usage of credit card (CC) online transactions has been also dramatically augmenting. The CC (credit card) usage for a safety balance transfer has been a time requirement. Credit-card fraud finding is the most significant thing like fraudsters that are augmenting every day. The intention of this survey has been assaying regarding the issues associated with credit card deception behavior utilizing data-mining methodologies. Data mining has been a clear procedure which takes data like input and also proffers throughput in the models forms or patterns forms. This investigation is very beneficial for any credit card supplier for choosing a suitable solution for their issue and for the researchers for having a comprehensive assessment of the literature in this field.

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