Consumers' Attitude Towards Credit Cards: An Empirical Study

International Journal of Computing and Business Research (IJCBR)
ISSN (Online) : 2229-6166

Volume 4 Issue 3 September 2013
CONSUMERS ATTITUDE TOWARDS CREDIT CARDS: AN

EMPIRICAL STUDY
Dr. Sudershan Kumar

Former Head, Deptt. Of Management,
Sant Baba Bhag Singh Institute of Engg. & Technology
Khiala, P.O. Padhiana,
Distt. Jalandhar, Punjab (India)
ABSTRACT
The present paper is part of the doctoral thesis by the researcher. In this paper the researcher attempted at
empirical investigation of how credit card consumers respond to, and reveal their attitudes towards credit
cards. The objectives of this study are threefold: To understand the usage patterns of credit cards by the
consumers; To identify the grievances that the credit card holders face while using the credit cards; and,
To study if the card issuers make any efforts to remove these grievances. The stratified random sampling
technique was used to determine the size of sample. The sample size was 165. In the absence of
secondary data, a questionnaire was administered to the respondents and primary data was collected.
Likert Scale was used for this purpose. The attitudinal statements were created, and the instrument was
tested for its validity and reliability. Chi Square test was conducted and the results were found to be
statistically significant. Consumers appeared to be generally satisfied with the use of their credit cards
even though they have different views regarding other users. Certain practices by the credit card issuer
companies are negatively viewed by the consumers. On the whole, credit card users appeared to believe
that credit cards are useful, and that consumers are better off with credit cards than without them.
INTRODUCTION AND LITERATURE SURVEY

The use of credit cards originated in the United States during the 1920s, when individual companies, such
as hotel chains and oil companies, began issuing cards to customers for purchases made at those
businesses. The use increased significantly after World War II.
The first universal credit card which could be used at a variety of stores and businesses was introduced by
Diners Club Inc. In 1950, it issued the first credit card to 200 customers who could use it at 27
restaurants in New York. It charged card holders an annual fee and billed them on a monthly or yearly
basis. The American Express company established another major universal card in 1958.
The first national bank plan was Bank America Card which was started on a state-wide basis in 1959 by
the Bank of America in California. This was licensed in other states starting in 1966 and was renamed
Visa in 1976. Other major bank cards followed, including Master Card formerly Master Charge.
Credit Cards In India
Usage of credit cards by bank customers in India started since 1980s, but only in early 1990s, the market
has witnessed a quantum jump. The total number of cards issued by banks and outstanding has increased
from 2.69 crores in Dec., 2003 to 4.33 crores by the end of Dec., 2004. Likewise, the actual usage has
registered increased both in terms of volume and value, i.e. from 14.57 crore transactions amounting to
Rs.26, 951 crores during 2002-03 to 18.55 crore transactions aggregating Rs. 35,870 crores during 200304. In the year 2004, up to December alone card customers undertook about 21.19 crore transactions
amounting to Rs.44, 737.73 crores1. The credit card companies are referred to as Networks. The banks
that issue these cards are referred to as Issuers. Participants in credit card networks are primarily
comprised of consumers, issuers, merchants, acquirers, and network operators. These participants are
involved in a series of interrelated bilateral transactions.
Consumer credit card search behaviour
Several researchers argued that borrowers do not search for low credit card interest rates. Some of these
non-shoppers are convenient users. They consider interest rates irrelevant because they the pay balance
in full every month. Others perceive a low expected value of savings. If credit cards are used as a
financing mechanism instead of a medium of convenience, the interest rate should be an important
determinant of consumers choice of which credit card to hold.
So in the credit card market with wider price dispersion, greater anticipated savings, and lowered search
cost, consumers search activities are expected to payoff in terms of finding a card with a lower APR.
According to the economics of information theory, a consumer will search for lower prices as long as the
expected marginal benefits from additional search exceeds the expected marginal costs of the search.
Chang and Hanna (1992) discussed the benefits and costs of search for credit, including immediate
benefits such as a lower interest rate and finance charge and indirect benefits including better money
management, greater savings and convenience from using appropriate credit and gains in financial
knowledge and experience gathered from the search process. It is important to distinguish between
convenience and revolving credit card users since information search patterns may depend on how
consumers plan to use their credit cards. Mathew and Slocum (1969; 1970) were the first to distinguish
between them. Lee and Hogarth (1998) argued that search behaviours of revolvers and convenience
users were in fact different.
Several researchers (Ausubel, 1991; Cargill & Wendell, 1996; Chang & Hanna, 1992) have argued that
borrowers do not search for low credit card interest rates. Some of these non-shoppers are convenience
users. For them, interest rates are irrelevant because they pay the balance in full each month. Others
perceive a low expected value of savings. However, data shows that between 1992 and 1995 a higher
proportion of consumers revolved balances and the average value of those balances has increased
1
Credit Cards Industry- Use and abuse, Business World; July, 2007; pp54-59.

(Chimerine, 1997; Kennickell, Starr-McCluer & Sunden, 1997). If credit cards are used as a financing
mechanism instead of a medium of convenience, the interest rate should be an important determinant of
consumers' choice of which credit card to hold.
Furthermore, the cost of information about credit cards has declined. In 1988 the U.S. Congress passed
the Fair Credit and Charge Card Disclosure Act This act amended the Truth in Lending Act to expand
disclosure requirements for applications and mail solicitations for credit cards, making consumers'
comparison shopping easier. More information comes directly to consumers in the form of direct
marketing mail solicitations, which reduces consumers' information acquisition costs.
In this credit card market with wider price dispersion, greater anticipated savings, and lowered search
cost, consumers' search activities are expected to payoff in terms of finding a card with a lower APR.
The purpose of this paper is to explore whether consumers who revolve shop for credit and the
relationship between search and the payoff to search as measured by the APR.
Chang and Hanna (1992) noted that in today's complex financial market, the cost of information search
may be much greater for a money borrower than a goods buyer because the cost of this service may not be
fully or clearly disclosed until application and the language of the creditor is difficult to understand for
many consumers. However, in the credit card market, the cost information is fully disclosed at the time of
solicitation and the information often comes directly to the consumer rather than the consumer needing to
search for it. The terms used in credit cards are less complicated than other credit products such as
mortgages and home equity loans.
Ausubel (1991) argued that consumers do not search for low credit card interest rates because they expect
to use the cards only for convenience, rather than as a source of credit. They substantially underestimate
the probability they will accrue outstanding balances, and thus they pay unnecessarily high rates of
interest on these unanticipated balances. Furthermore, Ausubel assumed that consumers do not learn from
their experiences, so that they continually expect to carry zero balances even after carrying outstanding
balances. However, Ausubel's (1991) hypothesis of consumers' "irrationality" contradicts learning theory,
which hypothesizes that consumers learn from their experience.
Pozdena (1991) characterized a consumer's decision to use bank-card debt as a moral hazard because
cardholders choose to borrow at high bankcard interest rates when their financial conditions are relatively
weak. Over the last several years, amounts revolved on credit cards have grown faster than any other type
of consumers loan, indicating consumers' conscious use of credit cards as a means of financing
(Chimerine, 1997). In particular, many consumers view the convenience, ease, and flexibility of credit
card borrowing more favorably than the lengthy application and approval process associated with other
types of loans. Consumers' limited search for credit cards may be due in part to their use of credit cards as
a convenience medium (Canner & Luckett, 1992; Pozdena, 1991). If the majority of cardholders use
credit cards for convenience rather than as a source of borrowing funds, the benefits of search will be
limited. However, as revolving balances increase, the benefits of search, and the associated search
activity, are expected to increase.
From a policy perspective, it seems that disclosures have been effective in helping consumers who
revolve shop for credit cards with lower interest rates. However, even though we used APR as our
outcome measure, we do not really know if consumers understand what the APR is and how it can be
used in shopping for credit. Open end credit products like credit cards are relatively easy to understand
because the APR is identically the contract interest rate consumers pay, although cash advance fees, late
fees, over-the-limit fees and annual fees are also a part of the total cost of credit. In many other closed end
credit products, such as mortgages and installment loans, the APR and the contract interest rate are not the
same, and there is evidence of consumer confusion about the meaning of the APR (Lee & Hogarth,
1999).

The APR measure reported in the Survey of Consumer Finances is most probably the interest rate for
goods and services charged on the credit card. However, often there is a different interest rate for cash
advances, and interest begins to accrue immediately on these advances, unlike goods and service charges
for which there is a grace period before interest accrues.
Some of the lower APRs in this study may have been "teaser rates," which usually change after a certain
introductory period. Teaser rates have been around since the early 1990's (Canner and Luckett, 1992) and
consumers have learned to switch from one card to another, turning these "introductory" rates into longterm rates that can last over several years. Some financial institutions now offer to extend low rates or
provide other "loyalty incentives" to prevent switching (Nadler, 1999; Sanders, 1999b) or offer permanent
low rates (7.99%) to their best customers (Sanders, 1999a). While deals like these are available in the
market place, it may take substantial search to find them. Similarly, some of the higher rates (e.g. 29%)
may reflect sub-prime lending or secured credit card interest rates. However, sensitivity tests with subsamples of the respondents show that the model is robust with respect to the effects of information search
on the resulting APR.
The results of Sougata Kerr & Lucia Dunn (2002) show that: (a) high rejection probabilities do not affect
search propensities; and (b) high balance consumers search more even though they have a higher
likelihood of rejection. These results imply that search costs are no longer a dominant economic factor in
this market. The findings demonstrate one important policy Impact of the Truth-in-Lending Act which
has lowered the cost to consumers of gathering information about credit terms. This change in search
behaviour is an important factor in the observed decline in credit card interest rates in recent years.
RESEARCH METODOLOGY
This research project constitutes the study of credit card consumers attitude towards the credit cards. The
study was to be conducted among credit card holders, to address to the following questions:
a) What is the usage behaviour of credit card holders?
b) Are the consumers satisfied with service provided to them by credit card issuers? If not, what
are their Grievances?
c) Are the efforts being made by the issuers to remove or reduce these grievances?
Statement of the problem:
The research problem can be broadly stated as:
The credit card consumers are facing serious problems with interest rates and delayed billings leading to
overspending on genuine goods and services.
This statement was discussed with credit card holders and an effort was made to determine the level of
satisfaction derived out of the service provided to them by credit card companies. On the basis of that
discussion, the objectives of this study were formulated.
OBJECTIVES OF STUDY
The objectives of this study are two-fold:
a) To identify the grievances that the credit card holders face while using the credit cards; and
b) To study if the card issuers make any efforts to remove these grievances.
LIMITATIONS OF THE STUDY
a) A major limitation of the study was a very small population size and a non-co-operating and
sometimes stark refusal by the credit card companies (issuers) to divulge the list of credit card
holders in the cities of Ludhiana and Jalandhar.
b) Another major limitation was non-availability of resources to undertake the survey because this
project was not sponsored and all the costs were to be borne by the researcher himself.
c) Contacting respondents to collect data for such lengthy questionnaires proved to be another
limitation.

HYPOTHESIS DEVELOPMENT
H0 The credit card holders are satisfied with the services provided by credit card networks.
This was null hypothesis. This statement was discussed with more that 80 credit card holders belonging to
different strata and everybody rejected it. So on the basis of personal interviews and discussions with the
cardholders, the following statement was adopted as alternate hypothesis
H1 The credit card issuers are not honest with their consumers in awarding grace period.
When this statement was discussed with the friendly bank managers who happened to be the service
providers, they did not favorably respond to it and considered it to be a very strong statement, casting a
negative impact upon their working vis-a-vis the credit card issuers. They suggested stating this problem
in a milder manner, so another statement was developed as H1A.
H1A The credit card consumers rely more on service providers in terms of alerting them about the grace
period.
This statement was discussed with the same group of credit card holders who considered this statement to
be incomplete and thus the second aspect of this statement of hypothesis was developed, arising out of the
discussions with them.
H1B As the card use has become more common, negative opinion about credit card may have increased.
The researcher attempted at gathering secondary data or data sources within the Indian context, but
neither such data, nor any reliable data-source was available. The researcher then decided to adopt
primary data collection exercise. Since objective a) and b) were mutually related, it was decided that these
shall be addressed through questionnaire designed to collect the primary data.
SAMPLING PLAN
This study remained focused on the credit card consumers located in the cities of Ludhiana and Jalandhar
only. The researcher obtained lists of credit card holders. The number of such consumers was 963 in
Ludhiana and 748 in Jalandhar. So the universe for this study constituted (963+748) 1711 consumers of
credit cards. This was indeed a small universe.
The respondents were categorized on the basis of demographic factor such as occupation. The stratified
random sampling technique was used to determine the size of sample. Each stratum was formed on the
basis of common characteristics of the items to be put in each stratum. This meant that various strata be
formed in such a way as to ensure elements being most homogeneous within each stratum and most
heterogeneous between the different strata. Simple random sampling technique was used for selection of
items for samples from each stratum.
The method of proportional allocation is usually followed under which the sizes of samples from different
strata are kept proportional to the sizes of strata. That is if Pi represents the proportion of population
included in stratum i and n represents the total sample size, the no. of elements selected from stratum i is
n*Pi.
The researcher was left with a list of 1650 credit card holders, which, finally, constituted the universe for
this study. The entire universe was divided into four strata; viz., The Businessmen, Senior Govt. Officials
and Senior Non-Govt. Executives, Women, and Students.
The total sample size was decided upon every tenth entry into each stratum, thus amounting to1/10 of
1650 = 165 = n
No. Of businessmen
843
P1 =0.5109;
n1=84
No. Of Senior Govt. and Non-Govt.
407
P2= 0.2466;
n2 =40
Officials and Executives
No. Of Women
250
P3=0.1515;
n3 =26
No. Of students
150
P3 =0.0909;
n4 =15

For the purpose of this study, summated or Likert type scales were used. Summated scales were
developed by utilizing the item analysis approach wherein a particular item was evaluated on the basis of
how well it discriminated between those persons whose total score is high and those whose score is low.
Each response was given a numerical score indicating its favourableness or unfavourableness and the
scores were totaled to measure the respondents attitudes.
Measuring Instrument:
To study the grievances and problems faced by credit card consumers in consuming a variety of services
offered by credit card networks, a questionnaire was constructed and administered to the respondents.
This questionnaire included twenty-five questions related to core attitudinal factors containing statements
related to these attitudes. A Likert-type scale was developed by assigning score values based on five-point
scale, ranging from strongly disagree to strongly agree. Each strongly disagree point was awarded the
score value of -2, and a value of -1 was assigned to each Agree response. Other responses were assigned
the value of zero. The questionnaire was tested for validity and reliability.
DATA ANALYSIS FOR CONSUMERS SATISFACTION FROM CREDIT CARD USAGE
Data Analysis: The data analysis for this paper was carried out on the basis of data obtained through the
questionnaire.
Table 1: Desired information on new credit card accounts within group of respondents.
Desired information
Those with bank type card (Percent)
Important
Most Important
Rates/finance charges
67
54
Annual/membership fee
27
10
Late/penalty fee
9
2
Grace period
8
3
Fixed /variable rate
7
5
Minimum payment
9
3
None
5
3
Other responses
22
10
Do not know
10
10
Total
165*
100
* Because many respondent showed more than one response.
Ordering credit terms according to the proportion of respondents who reported that a certain term was
either very important or somewhat important shows that annual fee and annual percentage rates took the
top two spots.
Table 2: Importance of credit terms among holders of bank type credit cards
Credit term
Amount of the annual
fee
Annual percentage
rate of interest
Length of grace
period
Very
important
76
78
Somewhat
important
19
Not too
important
Not at all
important
Do not know
11
13
42
41

Amount of the credit

limit
Length of time to pay
off account if making
minimum payment
Amount of minimum
payment
Rewards like cash
back, merchandise, or
frequent flyer miles
36
41
13
10
Percep
tions
of
18
1
15
14
inform
30
ation
37
0
19
14
availa
25
31
bility
1
20
23
A
series
of
question inquired from all the respondents with bank type card accounts, about their perceptions of
information availability for such accounts. Almost two-thirds (sixty five percent) of holders of bank type
card accounts reported believing that useful information on credit terms was either very easy or some
what easy to obtain for themselves.
Table 3: Exposition of Responses to the Options of Question No. 2 of Questionnaire (In terms of
number of respondents)
Very
Somewhat
Not At All
Do Not
Important
Option
Important
Important
Important
Know
I consider the amount
126
31
0
5
3
of annual fee
I consider annual
129
21
0
8
7
percentage rate
I consider length of
69
68
2
18
8
grace period
I consider amount of
59
68
0
21
17
credit limit
I consider length of
86
29
2
25
23
time to pay off
I consider the amount
50
61
0
39
23
of minimum payment
I consider rewards like
41
51
2
33
38
cash back,
merchandise &
frequent flier miles
Table 4: Opinions of consumer credit user concerning case of obtaining information on credit terms
and on adequacy of information provided (Percent)
Opinion
For self
For others
52
Ease of obtaining useful information on credit term

Very easy.
Somewhat easy....
Somewhat difficult..
Very difficult..
Do not know...
21
44
26
6
3
11
32
36
11
9

Total
Creditors provide enough information
Yes ..
Some do/ some do not.
No
Do not know....
Total ....
100
100
65
49
2
4
31
43
2
4
100
100
In contrast, only six percent believed that obtaining this information was very difficult. This finding is
comparable to the results of the same question asked about perceived difficulties in obtaining information
on closedend credit accounts in earlier service, but it differs substantially from current respondents
views of the experiences of others with credit card accounts less than half of the holders of the bank type
cards believed that it was easy for others to acquire useful information on credit terms.
A related follow up question produced a similar outcome. Another question explored further the
distinction between views about personal experience with credit cards and that of others. Almost 90
percent respondents responded saying that such cards made managing finances either easier or that there
were no difference.
The questions asked were grouped into five separate groups. The first group was related to the type of
credit cards held by the consumers and the desired information they wanted to obtain from the credit card
companies.
The data so obtained is tabulated as follows:
TABLE 5: EXPOSITION OF RESPONSES OBTAINED IN NUMERICAL FORM QUESTION
NO. 6 TO 25
Question Number
6. The interest rates charged on credit cards are

reasonable
23
46
92
7. Credit card companies show enough concern for

protecting consumers privacy
30
33
90
8. Credit card billing statements are accurate
86
68
9. Credit card companies make too much credit

available to most people
115
35
10

10. Sending solicitations that offer low rate but only for
a short time probably misleads a lot of people
129
21
11. Credit card companies make it hard for People to get

out of debt
86
43
18
15
12. Credit card companies should not be allowed to

issue credit cards to college students
50
41
33
33
13. Overspending is the fault of consumers, not of the

credit card companies
99
44
10
14. I am generally satisfied in my dealings with my

credit card companies
81
62
10
15. My credit card companies treat me fairly
86
60
10
107
33
15
17. I trust that my credit card company will keep my

personal spending information confidential
53
60
24
25
18. Credit card companies provide an useful service to

consumers
69
76
19. Most people are satisfied in their dealing with credit

card companies
20
91
31
18
20. Consumers would be better off if there were no

credit cards
20
38
10
53
44
21. Information on the statement about how long It
112
33
10
16. It is easy to get a credit card from other

if I am not treated well
company

would take to pay off the balance if I make only the

minimum payment would be very helpful to me
22. Mailing and other ads that offer a low rate at first
followed by a higher rate is confusing to me
61
43
23
33
23. They provide a useful service to consumers
66
89
24. Most people are satisfied in their dealings with them
25
96
10
23
11
25. It would be a good thing for consumers if The credit

cards were not around
33
55
61
The Chi Square Test results showed that, for four degrees of freedom, the data obtained through
hypothesis H0 was not a good fit. Thus this hypothesis was declared null hypothesis.
For alternate hypotheses- H1a and H1b, the data was found to be extremely statistically significant.
RESULTS AND DISCUSSION

The data shows that all of the respondents held bank type credit card and about 41 percent held more than
two credit card accounts.
When asked further why credit cards have made managing finances easier the majority of respondent
stressed aspects of flexibility, a specially the smoothing of expenditure and repayment that credit cards
permit. The smaller proportion that did not find credit cards making managing finances easier, often noted
the possibility of over spending and over extending financial resources through credit card use. The
generally favourable view concerning the effect of credit cares on their personal financial management
contrasts sharply with consumers perceptions of the experience of other people. 55 percent of
respondents indicating that, in their view, credit cards made finances of other people easier or no
different. In contrast, 40 percent said that the finances of other were made more difficult by credit cardsfour times the proportion with a negative view of the effect of credit cards on their own finances. The
most common reasons for this contention were concerns about over spending, heavy debt, and a
continuous cycle of debt among the other consumers unknown to them.
The generally favourable view of respondents about information availability and their own circumstances
is moral boosting in that it seems to suggest directly and indirectly that many people are relatively
satisfied with their ability to obtain and use the information currently disclosed. This generally favourable
attitude contrasts with respondents perspectives on the experiences of others, to whom they appeared to
regard as more vulnerable. Unknown others are considered less able to obtain and use information or to
manage their finances well when using credit cards. The generally favourable attitude toward personal
experience with credit cards is supported by results of a later segment of interview concerning overall
satisfaction with credit cards. The question asked, Over all, how satisfied are you with your general
purpose credit card? The question requested a response on a five point scale ranging from very satisfied
to very dissatisfied. 90 percent respondents indicating that they were very or somewhat satisfied and only
five percent reported dissatisfactionThe pattern of responses to this question is much like earlier findings
especially if the very satisfied and those who are somewhat satisfied are clubbed together.
Sales penetration rate
A higher proportion of those purchasing through credit card usage said that the creditor has offered or
recommended the product but the proportion of consumer who has felt pressure to purchase appears to
have declined. This finding probably represents the rising prevalence of post-purchase telemarketing and
mail solicitation.
Attitudes towards card features, card issuers and other users
To examine why card users might have the general attitudes about credit cards that they do, this study
also asked question about specific features of credit cards and about card issuers and users. The questions
were given the form of statements with which the respondents could agree or disagree. Each statement
was evaluated on a 5 point scale ranging from strongly agree to strongly disagree. Weights were provided
to each of the option and weighted averages were calculated on the basis of responses to each of the
statements made by the respondents. Responses to these questions reveal an interesting diversion of views
that might help explain why overall attitudes are developed. The responses suggest that the current
negativity may have arisen in part from an individuals perceptions of other consumers difficulties rather
than from his/her own experiences. The hypothesis that as card use has become more common, negative
opinion about card use may have increased, was specifically addressed through these statements.
Consumers seemed to be concerned about specific practice of credit users. All the attitudinal statements
have been grouped as a specific practices of card issuers (question nos. 6, 7, 8), credit issuers and
consumer in general (question nos. 9, 10, 11, 12 and 13), card issuers and the respondent (question nos.
14, 15, 16, 17), general satisfaction or dissatisfaction (question nos. 18, 19 and 20), information

availability (questions nos. 21, 22), and general satisfaction or dissatisfaction with closed-end creditors
and lenders (question no. 23, 24 and 25).
Table 6: Attitudes of holders of bank type credit cards and card issuers. (Figures in %)
Attitude
Specific practices of card issuers
The interest rates charged on credit
cards are reasonable.
Credit card companies show
enough concern for protecting
consumers privacy.
Credit card billing statements are
accurate.
Card issuers and consumers in
general
Credit card companies make too
mush credit available to most
people.
Sending solicitations that offer low
rates but only for a short time
probably mislead people.
Credit card companies make it
hard for people to get out of debt.
Credit card companies should not
be allowed to issue credit cards to
college students.
Overspending is the fault of
consumers, not the credit card
companies.
Card issuers and me
I am generally satisfied with in
dealings with my credit card
companies.
My credit card companies treat me
fairly.
It is easy to get credit card from
any other company if I am not
treated well.
I trust that my credit card
companies will keep my personal
spending information confidential.
General satisfaction or
Strongly
Agree
Agree
Somewhat
Cant
Say
Disagree
Somewhat
Strongly
Disagree
14
28
56
18
31
20
30
52
41
70
21
78
13
52
26
11
30
25
20
20
60
27
49
38
52
37
65
20
32
36
14
15

dissatisfaction
Credit card companies provide a
42
46
4
5
3
useful service to consumers.
Most people are satisfied in their
12
55
3
19
11
dealings with credit card
12
23
6
32
27
companies.
Consumers would be better off if
there were no credit cards.
Information availability
Information on the statement about
68
20
2
6
4
how long it would take to pay off
the balance if I make only
minimum statement would be very
helpful to me.
37
26
3
14
20
Mailings and other ads that offer a
low rate at first followed by a high
rate are confusing to me.
General satisfaction or
dissatisfaction with closed-end
creditors and credit card company.
40
54
2
3
1
They provide a useful service to
consumers.
15
58
5
14
6
Most people are satisfied in their
5
20
5
33
37
dealings with them.
It would be a good thing for
consumers if they were not around.
Specific practices of credit card issuers
A significant number of holders of bank-type credit card (84 percent) believe that the annual percentage
rates charged on outstanding balances are too high. They also express concern over privacy practices. In
contrast, relatively lesser number of them expressed concern about Consumers feelings about
experiences with credit card in general are even more negative than their feelings about specific practices.
Holders of bank credit cards in this study believe that too much credit is available, that consumers are
confused about some practices, and that credit users have difficulty getting out of debt 55 percent of the
respondents said that issuers should not be allowed to market cards to college students. Moreover, they
appear to believe that consumers bring on themselves many of the problems associated with credit cards.
90 percent of the respondents agreed to some extent that overspending is the fault of consumer, not of
card issuer.
The evidence from this study does not suggest that negative views if credit cards arose from adverse
personal experiences. In fact consumers opinions about their own relations with their current card issuers
are much more agreeable than their opinions about the relations of consumers in general. 89 percent
holders of bank credit cards expressed their satisfaction for dealings with their card companies, that their
card companies treat them fairly, and that it is easy to get another card if they are not treated fairly. 68
percent trust that their own card companies would keep their personal information confidential,
significantly more than the proportion believing that card companies in general, show enough concern
about protecting privacy (49 percent). Card holders opinions about their own experiences are almost the
opposite of their views about consumers experiences in general, suggesting considerable concern over

behaviour of others and possibly a belief that they can handle credit cards but other credit card holders
cannot.
Irrespective of the concerns about some practices and experiences, consumers appear to be satisfied with
the credit card market in general. 88 percent of the bank credit card holders said that credit cards provide
a useful service to consumers, and 73 percent expressed their satisfaction in their dealings with card
companies. 70 percent disagreed to the statement that consumers would feel better without a credit card.
These results showed that credit and creditors are not viewed completely favourably, even by the users of
the service, but that most users are favourably inclined.
Many bank credit card holders responding to this study said that it would be helpful to include on their
billing statement, information about the length of time it would take to pay off the balance if only the
minimum payment were made each month. It can be safely deduced that the consumer did not use the
card during the repayment period and that the balance declined on schedule. If the balance were to
fluctuate considerably, the deduction would be difficult or impossible, and most likely meaningless.
Respondents to this study did not consider the implications and complexities of the calculation or
deduction, but were simply acknowledging the desire for a practical measure of the burden they were
incurring upon. Many respondents also reported that teaser rates are confusing. They could avoid teaser
rates totally by ignoring the mailing that promote them, thus, consequently the finding of this study may
reflect concern among consumers that card issuers have complicated promotions sufficiently, that it is
difficult to understand and accept advantageous offers when these are made.
A multidimensional set of attitudes emerged from the responses to the questions about opinions. These
are not very surprising, given that, overall, consumers seem to think that credit cards are both good and
bad. They believe that finance percentage rate on outstanding balances are too high, are suspicious of how
personal information is used, and have relatively little confidence in other individuals who use credit
cards. Their imagination of the other card holders in contact with credit card issuers, whose behaviour is
already suspect, lead them to possibly negative consequences such as excessive card shifts to more
personal experience, they view the outcome much more favourably, suggesting that actual problems with
credit cards are not nearly as widespread as consumers think them to be when they think about the largely
unknown credit card holders. On the whole, in this study, bank credit cardholders appear to believe that
credit cards are useful and that consumers are better off with credit cards than without them.
This study also asked whether credit card companies usually give enough information to credit card
holders to enable them to use the credit cards wisely. 46 percent of holders of bank credit cards answered
affirmatively. This frequency seemed low in the light of the widespread use of credit cards, raising the
question of whether the other cardholders effect might be exerting a negative bias. Some consumers
might believe that they personally have enough information but, those other consumers, who can be
counted on to make mistakes when dealing with card issuers, do not.
To explore this possibility, two indexes of overall attitudes- one of negativity toward the other
cardholders and the other of positiveness about personal experiences- were constructed from responses to
statements about card issuers and consumers in general and card issuers and the respondent. For each of
the five statements, ranging from question numbers 9 to 13 in the category of card issuers and consumers
in general, which were framed to reflect negatively on issuers and consumers, a value of -2 was assigned
to each strongly agree response and a value of -1 was assigned to each Agree response. Other
responses were assigned a value of 0. The values were then summed for each respondent, giving an index
value within a range of -10 to 0 for that respondent. The respondents were then divided into two groups,
Strongly Negative (an index value of -7 through -10, characterizing about 42 percent of bank credit
cards) and all others. A similar but positive index was constructed from the favourable responses about

personal experiencesThe respondents were similarly divided into two groups, Strongly positive (about
49 percent of bank credit cards) and all others.
Respondents who were not strongly negative about other consumers were in fact somewhat more likely to
believe that card issuers give cardholders enough information to enable them to use their credit cards
wisely.
Table7: Proportion of holders of bank type credit cards believing that specific actions to provide
more information would be helpful (The figures in table are the actual no. of respondents responding to
each action.)
Action
Bank type card1 holder who
All bank type
said more information
card2 holders
would be helpful
Clearly state interest rates and change in
interests rate
35
19
Clearly define fees and charge
15
8
Make fine print bigger
12
6
Offer credit counseling
12
6
Provide more information about over
extension
14
8
Give information about costs if only the
minimum amount is paid
11
6
All other responses
9
4
Total no. of respondents
108
57
A bank-type card is a general-purpose credit card with a revolving feature; includes Bank Americard, Choice,
Discover, MasterCard, Master Charge, Optima, and Visa, depending on year.
2
Includes cards issued by banks, gasoline companies, retail stores and chains, travel and entertainment card
companies (for example, American Express and Diners Club), and miscellaneous issuers (for example, car rental
and airline companies).
Holders of bank credit cards, who said either that card issuers, does not provide enough information or
that they do not know were also asked a follow-up question, What kind of information do you think
would be helpful? The wording of the question permits thinking about other consumers as well as more
personally. The responses suggest a concern about the clarity of already available information, raising a
question as to whether the required information provided now is so extensive and frequent that it is almost
overwhelming. Those who said that more information would be helpful simultaneously seemed to be
saying that they do not understand the information already provided, as many of the features they said
would be helpful- clear statement of interest rates and changes in rates, and a clear definition of fees for
cash advances and other services, for example- are already required by disclosures. Respondents
indicating, that credit counseling and information about overextension would be useful, could be
expressing concern for others as well as for themselves.

To learn about consumers behaviour with respect to paying balances and the likelihood of their stopping
to the use of credit cards after paying only the minimum amount, a question was asked containing five
responses (Table-9). 112 respondents out of total 165(68 percent), very strongly agreed to the question no
21 of questionnaire 2. This being a critical question, the 112 respondents were further subjected to five
responses. Among them, about 35 percent of bank credit cardholders said they hardly ever pay their
balance in full. 11 percent of cardholders reported that they sometimes pay more than the minimum
amount due, and only 7 percent said they hardly ever pay more than the minimum.
Those who would benefit most directly from information about the length of time it would take to pay off
a revolving account by making only the minimum payment each month would be card users who pay the
minimum and do not make additional charges. The findings of this study indicate that 11 percent of bank
credit cardholders fall in this category if only those who say they hardly ever pay more than the minimum
are considered, the proportion who report that they stop using the card falls to 4 percent of bank credit
cardholders.
The holding and use of general purpose credit cards with a revolving feature, as well as balances
outstanding, have increased substantially. These bank credit cards are a substitute for the installmentpurchase plans offered by retail stores. Consumers like the convenience offered by the credit cards but are
also keeping reservations about their use.
FINDINGS AND CONCLUSIONS
The study indicated that useful information regarding credit cards was considered important by
respondents. Various credit terms, such as percentage rates and finance charges were considered to be
main focus of respondents for the required disclosures. It also indicated these terms as important for
opening new credit card accounts. Cost terms such as annual fee and annual percentage rates were among
the most important terms judged by the respondents.
The study further indicated that the degree of difficulty in obtaining useful information about credit terms,
differ on the basis of their personal experiences vis--vis the other card users. Responses regarding the
information provided by credit card companies towards wise use of credit cards were favourable. Across
checking question elicited similar responses from them.
The study further indicated that credit card holders consider managing their finances easier or no
different, because of flexibility, smoothing of expenditures and repayments. But their personal
experiences differ sharply on account of their perceptions about the experiences of other card users. The
study further indicated that spending, heavy debt and a continuous cycle of debt are the most common
reasons for card users contentions about other consumers of credit cards.
The study further indicated a moral boosting favourable view of respondents about information
availability and their own circumstances, as, it directly or indirectly, suggests a relatively higher degree of
satisfaction about their ability to obtain and use information currently disclosed by credit card companies.
But this favourable attitude appears to be in contrast with their own perceptions and others experiences,
as, others were considered more vulnerable by them. This was supported by the results of personal
interviews conducted two months after the questionnaire-2 was administered to the respondents.
The study further indicated that credit card users consider their usage as a good thing, or, good with
qualifications. This finding may probably represent an increased effort by credit card issuers such as postpurchase telemarketing and mail-solicitation. It also indicated that sales penetration rate is on the rise.
The study attempted at examining why credit card users have general attitudes which they currently hold
about credit cards. Attitudinal statements evaluated using Likerts five point scale revealed interesting
divergent set of views. It revealed that the currently held negative attitudes might have developed partially
due to individuals perceptions of the difficulties faced by other consumers and not their personal
experiences. It also shed light on consumers perceptions regarding specific practices of credit card

issuers. The evidence generated from the study does not actually suggest the development of negative
views towards credit cards from adverse personal experiences. Their opinion about their own relations
with current credit card issuers was found to be more agreeable than with other consumers. They
significantly agreed to a fair treatment and protecting personal privacy etc., by the credit card companies.
Credit card consumers opinions about own experiences are almost opposite to their views about other
consumers experiences in general, suggesting considerable concern over behaviour of others and
possibly a belief that they can handle credit cards but other consumers cannot. Although some practices
and experiences differed, yet in general, the credit card users appeared to be satisfied with their credit
cards. Other areas of agreement include- credit card companies offer useful service and were satisfied in
their dealings with Credit Card Company. The results showed that credit and creditors are not viewed
completely favourably even by the users, but the users appeared to be favourably inclined.
The study indicated that the credit card users do not take into consideration the implications and
complexities of the payoff balances, calculations or deductions, but acknowledge a practical measure of
the liabilities they incur upon. They also were confused by teaser rates which could be avoided by
ignoring promotional mail solicitation made by credit card companies, thus reflecting concern among
consumers that the card issuers have complicated such promotions sufficiently and it is difficult to
understand and accept advantageous offers when made by the companies.
The study further revealed that a multidimensional set of attitudes emerged from opinion regarding the
credit card being good or bad. The respondents believe that finance percentage rates on outstanding
balances are too high, are suspicious of how personal information is used by the companies, and have
relatively little confidence in other individuals who use credit cards. Their perception of other card
holders in contact with other card issuers, whose behaviour is already suspect, lead them to possibly
negative consequences such as excessive card shifts to more personal experiences. They view the
outcome much more favourably, suggesting that the actual problem with credit cards is not merely as
more widespread as consumers think when they opine about the unknown credit card holders. Credit card
users appear to believe that credit cards are useful and that consumers are better off with credit cards than
without them.
The study further revealed that credit card holders are concerned about the clarity of already available
information and it being so extensive and frequent that it is almost overwhelming.
The study further indicates that a significant number of consumers do not pay their balance repayments in
full and usually do not stop using the credit cards after paying only minimum amount .Thus the holding
and use of general purpose credit cards with a revolving features as well as balance outstanding has
increased significantly. These credit cards appear to be a substitute for the installment-purchase plans
offered by retail stores. Consumers like the convenience offered by credit cards but also keeping
reservations about their use.
GRIEVANCES
A major grievance that emerged from the personal interviews was regarding delayed information about
the outstanding balances (77.5 percent) rendering them with little or no time for repayments (81.8
percent), thus leading to penal charges or teaser rates (75.8 percent). Most of the respondents who stated
stopping the use of credit cards (20 percent- question 20; questionnaire-2) cited this as the reason.
The stipulated period for sending the statement is generally within 20 days of making a purchase. Instead,
it takes more than 30 days to reach the credit card holder, resulting into attracting penal charges. This has
deterred many credit card holders from effectively using their credit cards.
CONCLUSIONS
Based on the analysis and facts emerging from data analysis and discussion, the following conclusions
can be drawn safely:

1. The study, which focused on identifying the attitudes of consumers towards credit cards, found
the information availability as the most important. The information regarding the credit card
terms such as repayment, finance charges, fees & charges was found to be more important to the
consumers (54 percent).
2. The consumers attitude towards having a credit card was favourably inclined in affirmative.
3. The consumers when compared their personal experiences with their perceptions of other card
users, indicated that their own experiences differed from what they expected as the experiences of
others (Table-5).
4. The credit card users were more favourably (90 percent) inclined towards the suggestion that a
general purpose credit card with a revolving feature help them managing their finances easily.
5. Consumers appeared to be generally satisfied with the use of their credit cards even though they
have different views regarding other users.
6. Certain practices by the credit card issuer companies are negatively viewed by the consumers
such as too much availability of credit (70 percent), smaller period for repayment (78 percent)
and no check on overspending (81 percent) though they agreed that it is the fault of consumers
and not of card issuers.
7. Another belief that emerged, was that finance percentage rate on outstanding balances are too
high (56 percent), dubious usage of personal information (30 percent), and relatively little
confidence in other individuals who use credit cards.
8. On the whole, credit card users appeared to believe that credit cards are useful (88 percent), and
that consumers are better off with credit cards (59 percent) than without them.
SCOPE FOR FURTHER RESEARCH
The researcher feels there is much scope for furthering this study in the areas of:
1. Consumers cost of owning a credit card and the benefits accrued out of it, by him. This analysis
of benefits and costs is very important to understand the attitudes of the consumers towards credit
cards.
2. The researcher also feels that the study of fixing annual Percentage Rates (APR) and penal rates
in case of failure of repayments of outstanding balances in time, by the credit card companies
warrant a serious research.
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