Effects of balance transfer offers on consumer short-term finance: evidence from credit card data

1 Background Credit cards have been widely used in the USA. The industry has matured so much that most households hold many credit cards and most consumers use credit cards as means of payment. They usually maintain their records on credit cards. In the USA, a total amount of credit card balances is about $700 billion. Because of the wide usage of credit cards, the term of cards is becoming a major selling point in addition to some other attractive offers (e.g., balance transfer). Every credit card company tries to offer good terms in many forms to attract more customers and encourage existing customers to borrow more. The credit card company gives offers with different combinations of interest rates and fees with different promotion durations. Under such a business environment, the company raises a business inquiry regarding how consumers response to different offers and what specific components of the offers are. Providing many attractive offers, credit card companies have a business inquiry regarding how consumers respond to their different contract offers. A number of research efforts previously examined a consumers’ choice and an effect of offers. For example, Shui and Ausubel (2004) found that more consumers accepted an introductory offer which had a lower interest rate with a shorter duration than a higher interest Abstract