Credit Card Pricing: The CARD Act and Beyond

Market Structure and Credit Card Pricing: What Drives the Interchange?

This paper presents a model for the credit card industry, where oligopolistic card networks price their products in a complex marketplace with competing payment instruments, rational consumers/merchants, and competitive card issuers/acquirers. The analysis suggests that card networks demand higher interchange fees to maximize card issuers’ profits as card payments become more efficient. At equi...

Risk Based Pricing in the Credit Card Market:

This paper explores the risk-based pricing strategies of banks issuing credit cards in the United States. We employ a unique database which combines both the risk of cardholders (demand side) and terms and conditions of credit cards (supply side) offered in the US. Our results suggest that the annual percentage rates paid per unit of long-term risk decrease, implying that high-risk cardholders ...

Sustaining Welfare for Consumers in the Credit Card Industry Reactions to the Credit CARD Act of 2009

Credit card interchange fees ∗

We build a model of credit card pricing that explicitly takes into account credit functionality. We show that a monopoly card network always selects an interchange fee that exceeds the level that maximizes consumer surplus. If regulators only care about consumer surplus, a conservative regulatory approach is to cap interchange fees based on retailers’ net avoided costs from not having to provid...

Credit Card Redlining

This paper evaluates the presence of racial disparities in the issuance of consumer credit. Using a unique and proprietary database of credit histories from a major credit bureau, this paper links locationbased information on race with individual credit les. After controlling for the in uence of such other place-speci c factors as crime, housing vacancy rates, and general population demographic...