No limits : exploring the psychology of unsolicited credit card limit increase offers

The issue of credit card debt has become an increasing concern in recent years. In Australia, for example, there is currently $42.5 billion worth of outstanding debt on credit cards, with $30 billion (over 70 per cent) bearing interest. Further, in 2001, Visa reported that 32 per cent of consumers had not paid their card off in the previous 12 months, which suggests that interest-bearing debt in Australia is held by approximately only 113 of credit card borrowers. An important element of credit card marketing is the use of psychological manipulations to encourage consumers to take-up credit. In this article, we examine the use of language and imagery in unsolicited credit card limit increase offers, and how these might influence consumers' decisions to increase their credit card limit. The analysis found that the use of terms that focused on the benefits of credit card use, such as "choice", "freedom", and "peace of mind" were used consistently to convince consumers to increase their credit card limit, whereas the use the of terms that could be considered more pragmatic and with direct reference to the nature of the product, such as "debt", "repayment" and "loan", were rarely used. Similarly, the use of colour, text changes, and images, were used which may have an influence over a consumer's ability to rationally consider whether the increase is appropriate for them. The paper concludes by recommending that government and representative bodies need to take into account the psychological manipulations used by credit card providers when developing consumer policy and codes of ethics.

Congratulations, you're pre-approved! : an analysis of credit limit upselling letters

Consumer Action commissioned Dr Paul Harrison, Deakin Business School, Deakin University and Marta Massi, School of Marketing and Communication, Lumsa University (Rome), to study the psychological aspects of one form of credit marketing – unsolicited credit card limit-increase offers (UCCLIOs). The researchers studied 21 UCCLIO letters – 17 provided by consumers and four provided by banks – and applied theories developed from previous research in the fields of marketing, consumer behavior, behavioural economics and cognitive psychology, to describe likely ways in which UCCLIO’s influenced consumer behavior and decision making. The researchers make some recommendations from a behavioural perspective based on their findings, and Consumer Action proposes how these findings might be applied to consumer policy.

Domain-driven classification based on multiple criteria and multiple constraint-level programming for intelligent credit scoring

Extracting knowledge from the transaction records and the personal data of credit card holders has great profit potential for the banking industry. The challenge is to detect/predict bankrupts and to keep and recruit the profitable customers. However, grouping and targeting credit card customers by traditional data-driven mining often does not directly meet the needs of the banking industry, because data-driven mining automatically generates classification outputs that are imprecise, meaningless, and beyond users' control. In this paper, we provide a novel domain-driven classification method that takes advantage of multiple criteria and multiple constraint-level programming for intelligent credit scoring. The method involves credit scoring to produce a set of customers' scores that allows the classification results actionable and controllable by human interaction during the scoring process. Domain knowledge and experts' experience parameters are built into the criteria and constraint functions of mathematical programming and the human and machine conversation is employed to generate an efficient and precise solution. Experiments based on various data sets validated the effectiveness and efficiency of the proposed methods. © 2006 IEEE.

Micropayments and e-commerce transactions : Thailand

Online payments in electronic commerce (e-commerce) are usually carried out with credit cards because they are the most convenient to use. Web sites that do not accept credit cards risk losing their customers. Yet potential customers do not include only credit card holders. There are a lot of potential customers who do not have credit cards, some for cultural reasons, others because of trust implications and others because of cost. Even among those who have credit cards, some do not buy online just because they do not feel that the system is secure enough to give away their credit card information over web pages. More importantly perhaps, credit card payments are not suitable for small-value purchases due to their high-incurred overheads to merchants.

The ethical and policy implications of profiling 'vulnerable' customers

In the shadow of the global financial crisis, the issue of the marketing of credit has become an increasing concern in the past 12 months. Outstanding personal debt in the UK currently stands at £1479 billion and is rising by £1 million every 10.6 min. In Australia, there is currently $44.6 billion worth of outstanding credit card debt, and in the US, $2596 billion was owed on credit cards in 2008. At present, the banking sector utilizes sophisticated research methods to profile consumers, including those who might be considered financially vulnerable. However, the policy frameworks in most industrialized countries do not account for this form of target marketing when considering how to protect vulnerable groups. This paper is an initial attempt to examine the different methods by which profiling is conducted and the policy implications of this sophisticated form of segmentation and targeting. We argue that current consumer policies are inadequate in protecting vulnerable consumers from these marketing techniques, and recent recommendations from the Federal Reserve Bank of the United States, and the Australian Law Reform Commission to allow banks and lenders to ‘pre-screen’ potential customers will exacerbate personal debt levels, rather than reducing them.

Ball point pen writing two signatures SFX

Ball Point Pen Writing Two Signatures SFX.

A perspective on credit derivatives

This contribution offers an explanation of credit derivatives as a group of financial instruments having a common purpose being the managing of credit exposures, and thus credit or default risk. This paper explores the links between their economic and financial manifestations and the legal bases for their widespread application. To ensure an understanding of the purposes served by each of the main types of credit derivatives, a detailed scrutiny of individual instruments is undertaken. Issues relating law and economics to trading in this type of derivative are investigated, then pricing issues and empirical evidence are considered. A summary brings together the range of features bearing upon the effective development of a market in these financial instruments.

Scaling the volatility of credit spreads: evidence from Australian dollar eurobonds

The linear rescaling of the variance of an asset's return is used by many asset pricing models when an annualised risk coefficient is required. However, this approach may not be appropriate for time series, which are not independent and identically distributed (IID). This paper investigates the scaling relationships for daily credit spreads, from January 1995 to May 1998, between AAA-, AA-, and A-rated Australian dollar denominated Eurobonds with maturities of 2, 5, 7, and 10 years. The credit spread return all display similar scaling properties with the estimated standard deviation, based upon a scaling at the square root of time, significantly underestimating the actual level of risk predicted from a normal distribution. These results have implications for risk managers and trading of credit spread instruments.

CO2 credit or energy credit in emission trading?

Emission trading is a good concept and approach to tackle global warming. However, what “currency” or “credit” should be used in the trading has remained a debatable topic. This paper proposed an “Energy Credit” concept as an alternative to the “CO₂ credit” that is currently in place. From the thermodynamic point of view, the global warming problem is an “energy balance” problem. The energy credit concept is thought to be more thermodynamically correct and tackles the core of the global warming problem more directly. The Energy credit concept proposed can be defined as: the credit to offset the extra energy trapped/absorbed in the earth (and its atmosphere) due to the extra anthropogenic emission (or other activities) by a country or company. A couple of examples are given in the paper to demonstrate the concept of the Energy credit and its advantages over the CO₂ credit concept.

Micro-credit programs and land distribution: a note

"Micro-credit" has come to refer to a popular extension strategy---usually in the agricultural sector---whereby a government or NGO extends credit at favorable rates to poorer borrowers, with repayment being supported by some kind of mortgage on the borrower's social capital. In the commonest case, eligibility is determined by the borrower's wealth, as indexed by his/her landholding. This note shows that, with an imperfect land market, the response to such a program will be to fragment landholdings which are smaller than a certain threshold, while larger holdings remain unaffected. Thus the pattern of landholding will tend to become more polarized.