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Do Credit Card Companies Screen for Behavioral Biases?

posted by cmn32480 on Wednesday September 07 2016, @07:55AM   Printer-friendly
from the thieving-bastards dept.

An Anonymous Coward writes:

There are substantial differences in the credit card offers that banks extend to different potential customers. Less-sophisticated borrowers receive offers with more back-loaded and hidden features, as well as more upfront rewards, visual distractions, and fine print at the end of the offer letter, according to Hong Ru and Antoinette Schoar in their new study, Do Credit Card Companies Screen for Behavioral Biases? (NBER Working Paper No. 22360). Banks also ratchet up these hidden features when their cost of funding increases, and when the credit risk of consumers is lower, which reduces the risk for the banks that customers default once they are hit with the unexpected charges. Hidden fees go up when state unemployment insurance benefits become more generous.

https://www.nber.org/digest/sep16/w22360.html

One more way in which Big Data is used against Little Guys.

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  • (Score: 0) by Anonymous Coward on Wednesday September 07 2016, @05:00PM

    by Anonymous Coward on Wednesday September 07 2016, @05:00PM (#398781)

    Since graduation, I have _always_ been at 50+% savings rate.

    Fuck you. Since my ex-parents threw me out, I've saved all I can. It usually amounts to about 2-5%, and that's quickly wiped out by shit happening.

    I'm better off fucking playing the lottery.

  • (Score: 0) by Anonymous Coward on Wednesday September 07 2016, @06:09PM

    by Anonymous Coward on Wednesday September 07 2016, @06:09PM (#398804)

    Maybe you missed the part where, in 2008, I had nothing? Sure, I was saving 50+%, but I didn't have anything.

    Maybe you missed the part where, in 2009, I had nothing _again_ after paying on my then-fiance-but-now-ex-wife's loans? Sure, I was saving 50+%, but I didn't have anything.

    Maybe you missed the part where, in 2011, I had just started a PhD program, had a house which had "$40K" of equity, and just wrote a check for all of my money to my now-ex-wife? That is close-to-nothing (certainly it was 1 paycheck in my bank after writing a divorce check), as $10K goes towards closing costs (if you sell) and houses themselves bleed money in required maintenance (close to $9K this year, gross).

    Maybe you missed the part where my wife got wiped out and had to restart from nothing (I helped, but its not like it was a great time)?

    Maybe you missed the part where we set up a business that now makes $50K/year (hoping for $100K next year) from literally nothing?

    Yes, I have been very fortunate. I don't deny this. However, if you are interested in help, I'd be happy to give a point of advice or nine. Much of the "real progress" has been made in the last 5 years. I get it. Life is hard. That is why incredibly careful planning is terribly valuable.