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The Effects of Card Level and Bank Level Benefits on Credit Card Interest Rates (Akin G.G., Aysan A.F., Kara G.I.)

Credit Cards

Abstract Credit card rates have been shown to be very high and non-responsive to the changes in the costs of funds. The failure of price competition led to a shift of interests from price to non-price competition in these markets. Credit card issuers create switching costs for their customers by providing non-price benefits. These are either card level benefits that depend on credit card usage or bank level benefits that arise from the convenience and quality of the general services of the issuer bank. This paper empirically investigates the nature of non-price competition in the Turkish credit card market using panel data, introducing the first study of this kind for an emerging market. As the main result, a significant and robust positive relationship between switching costs and credit card interest rates is obtained, confirming that as non-price benefits increase, banks charge higher credit card interest rates to their customers.
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Libref/ Akin G.G., Aysan A.F., Kara G.I. (2009) The Effects of Card Level and Bank Level Benefits on Credit Card Interest Rates, Paper presented at SMYE 2009
© Программирование — Александр Красильников, 2008
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