455,779 research outputs found

    A Model of Money and Credit, with Application to the Credit Card Debt Puzzle

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    Many individuals simultaneously have significant credit card debt and money in the bank. The so-called credit card debt puzzle is, given high interest rates on credit cards and low interest rates on bank accounts, why not pay down this debt? Economists have gone to some lengths to explain this. As an alternative, we present a natural extension of the standard model in monetary economics to incorporate consumer debt, which we think is interesting in its own right, and which shows that the coexistence of debt and money in the bank is no puzzleMoney, credit, monetary search models, credit card debt puzzle

    Non-price competition in credit card markets through bundling and bank level benefits

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    The attempts to explain the high and sticky credit card rates have given rise to a vast literature on credit card markets. This paper endeavors to explain the rates in the Turkish market using measures of non-price competition. In this market, issuers compete monopolistically by differentiating their credit card products. The fact that credit cards and all other banking services are perceived as a bundle by consumers allows banks to deploy also bank level characteristics to differentiate their credit cards. Thus, credit card rates are expected to be affected by the features and service quality of banks. Panel data estimations also control for various costs associated with credit card lending. The results show significant and robust effects of the non-price competition variables on credit card rates.Credit Cards, Monopolistic Competition, Product Differentiation, Bundling, Bank Pricing Behavior, Regulation

    Information Sharing and Credit Rationing: Evidence from the Introduction of a Public Credit Registry

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    We provide the first evidence on how the introduction of information sharing via a public credit registry affects banks’ lending decisions. We employ a unique dataset containing detailed information on credit card applications and decisions from one of the leading banks in China. While we do not find that information sharing decreases credit rationing on average, the distribution of granted credit among borrowers with shared information has a unique pattern. In particular, compared to those with information reported only by this bank, borrowers with extra information shared by other banks receive higher credit card lines. While positive information shared by other banks augments lending of this bank, the effect of negative information shared by other banks is not significant. In addition, the availability of shared information through the Public Registry has mixed effects on how the bank utilizes internally produced information. Last, information sharing alleviates informational barriers in China’s credit card market, but not completely.information sharing;credit availability;credit rationing;credit card

    Pricing payment cards

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    In a payment card association such as Visa, each time a consumer pays by card, the bank of the merchant (acquirer) pays an interchange fee (IF) to the bank of the cardholder (issuer) to carry out the transaction. This paper studies the determinants of socially and privately optimal IFs in a card scheme where services are provided by a monopoly issuer and perfectly competitive acquirers to heterogeneous consumers and merchants. Different from the literature, we distinguish card membership from card usage decisions (and fees). In doing so, we reveal the implications of an asymmetry between consumers and merchants: the card usage decision at a point of sale is delegated to cardholders since merchants are not allowed to turn down cards once they are affiliated with a card network. We show that this asymmetry is sufficient to induce the card association to set a higher IF than the socially optimal IF, and thus to distort the structure of user fees by leading to too low card usage fees at the expense of too high merchant fees. Hence, cap regulations on IFs can improve the welfare. These qualitative results are robust to imperfect issuer competition, imperfect acquirer competition, and to other factors affecting final demands, such as elastic consumer participation or strategic card acceptance to attract consumers. JEL Classification: G21, L11, L42, L31, L51, K21interchange fees, Merchant fees, Payment card associations

    A Guide to the Card Payments System Reforms

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    Studies by the Reserve Bank undertaken from 2000 to 2002 concluded that the structure of pricing in the Australian card payments system was encouraging inefficient use of credit cards relative to EFTPOS. From 2003, therefore, the Bank progressively introduced reforms to address this issue: ‘interchange fees’ were reduced; merchants were permitted to reflect the cost of different payment instruments in their prices to consumers; and merchants were provided with more freedom to choose the payment instruments they accept. The effect of these changes was to increase the price to cardholders of using a credit card relative to EFTPOS, thereby reducing the incentive to use the more costly payment instrument (credit card) over the less costly one (EFTPOS) and reducing the overall cost of the payments system. The reforms also strengthened the ability of merchants to put downward pressure on the fees they pay when they accept cards.Card payment systems; Credit cards; Debit cards; EFTPOS; Interchange fees; No-surcharge rule; Honour-all-cards rule; Relative prices of payment instruments; Surcharges; Merchant service fees; Reserve Bank reforms; Card payments system reforms

    Consumer credit and payment cards

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    We consider debit and credit card networks. Our contribution is to introduce the role of consumer credit into these payment networks, and to assess the way this affects competition and equilibrium fees. We analyze a situation in which overdrafts are associated with current accounts and debit cards, and larger credit lines with ‘grace’ periods are associated with credit cards. If we just introduce credit cards, we find their merchant fees depend not only on the networks’ cost of funds and the probability of default, but also on the interest rates of overdrafts. Whilst debit card merchant fees do not depend on funding costs or default risk in a debit-card only world, this changes when they start to compete with credit cards. First, debit merchant acceptance increases with the default probability, even though merchant fees increase. Second, an increase in funding costs causes a surprising increase in debit merchant fees. Effectively, the bank offering the debit card benefits from consumers maintaining a positive current account balance, when they use their credit instead of their debit card. As a result, this complementarity may lead to relatively high debit card merchant fees as the bank discourages debit card acceptance at the margin. JEL Classification: L11, G21, D53card competition, complementarity, consumer credit, Payment pricing

    A TEMPORARY CARD LENDING SYSTEM AND A METHOD THEREOF

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    Present disclosure discloses a temporary card lending system (104) and a method thereof. The temporary card lending system may receive a request for issuing the temporary card and thereafter, the temporary card lending system may send an evaluation request for evaluating user details to bank A (106). Bank A (106) may evaluate the user details based on one or more parameters using one or more evaluation techniques and may send an evaluation report which includes an evaluation score to the temporary card lending system. Thereafter the temporary card lending system may send a card issuance request and the evaluation report to bank B (108), and bank B (108) may generate a temporary card based on the user details and the evaluation report and send the temporary card to the user based on an authentication mechanism

    Banking with Very Poor Women: Outreach and Sustainability of CARD-Rural Bank, a Grameen Innovator in the Philippines

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    The Grameen Bank in Bangladesh is known worldwide for its success in providing credit to the poor. However, subsequent replications of its methodology in other parts of the world have been less successful. Is there really an infallible solution that works everywhere, and is outreach to the poor compatible with sustainability? A Grameen replic ator in the Philippines, the Center for Agriculture and Rural Development (CARD), has recently set itself firmly on the path to sustainability through becoming a formal sector, rural bank – the first credit NGO in the country to do so. During the period 1993 to June 1999, CARD?s all-female outreach soared from 1,711 to 26,369 and its operational self-sufficiency ratio increased from 0.46 to l.09. At the end of June 1999, CARD?s loan portfolio stood at $2.7 million, its repayment rate was 99.9 per cent and its financial self-sufficiency ratio was 0.85. The principal lesson to be learned from CARD?s success is that Grameen-type MFIs can be sustainable and can substantially increase their outreach. CARD?s social capital comprises: (a) a core of good Grameen practices, such as high moral commitment on the part of the leaders, based on values instilled through training; peer control – to preclude adverse selection and moral hazard; and a strict credit discipline; (b) innovative adaptations to suit the Philippine context, such as the adoption of rural bank status under central bank supervision; vigorous mobilization of voluntary savings; the provision of differentiated, profit-making loan and insurance products; and a broadening of the clientele to include poor and non-poor depositors, while adhering to its mission of lending to poor women only. --

    THE CREDIT CARD FRAUD: INFLATION, CULTURE OF BORROWING AND RISING ECONOMIC INEQUALITY

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    The use of credit card has become a fashion and a symbol of social status, but very few people understand the problems related with its use. Credit card is a tool of the practice of fractional reserve banking of today’s banking industry. This paper tries to explore the implications of the use of credit card in specific, and through that the fractional reserve banking in general. It shows how credit card generates inflation, how it promotes the culture of borrowing by discouraging honest living and how it increases economic inequality in the society.Credit card, Fractional reserve banking, Central bank, Debit card, Money, Money creation, Inflation, Borrowing, Economic inequality
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