Lee, 1999 (2)


Lee, J. & Hogarth, J. M. (1999). Returns to information
search: Consumer credit card shopping decisions. Financial Counseling
and Planning
, 10 (2), 23-34.



Returns
To Information Search:



Consumer
Credit Card Shopping Decisions



 



Jinkook
Lee1

and 
Jeanne
M. Hogarth2

Interest rate competition
and risk-based pricing have created wide price dispersions in credit card
interest rates. In this environment, searching for price information on
credit cards is critical for many consumers, especially revolvers. Using
the 1995 Survey of Consumer Finances, payoff to consumers’ search was estimated.
A measure of potential savings was calculated based on the range of credit
card interest rates. The relationship between consumers’ search and payoffs
measured as annual percentage rate (APR) and dollar savings in interest
payments was examined. Increased search paid off for revolvers using both
measures.


Key words: Credit cards, Decision making, Information search, Survey
of Consumer Finances


1. Jinkook Lee, Associate Professor, Department of Housing and Consumer
Economics, University of Georgia, Athens, GA 30602. hone: 706-542-4722
Fax: 706-542-4397. E-mail: jlee@fcs.uga.edu

2. Jeanne M. Hogarth, Consumer Policies Program Manager, Consumer
& Community Affairs, Federal Reserve Board, Washington DC 20551. Phone
202-785-6024, E-mail: jeanne.m.hogarth@frb.gov

The
analysis and conclusions set forth are those of the authors and do not
necessarily indicate concurrence of the Board of Governors, the Federal
Reserve Banks, or members of their staff. We wish to thank Loren Geistfeld,
Sherman Hanna, Arthur Kennickell, Annika Sund
én
and anonymous reviewers for comments on earlier drafts. All errors remain
the sole responsibility of the authors.


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