SoylentNews

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.