Credit card datapoint of the day
Barbara Kiviat pulls this chart from a paper by Ryan Bubb and Alex Kaufman, who have an op-ed in today’s NYT about credit cards. It basically makes the same point, in empirical and visual form, that Mike at Rortybomb made in a more theoretical and mathematical form last month.
The thing to pay attention to here are the 95% confidence intervals as much as the red and blue lines. What they show is that the lowest bank penalty rates are vastly, and needlessly, higher than the highest credit-union penalty rates. People choose credit cards based on which one has the lowest introductory APR, or sometimes based on which one has the lowest purchase APR. They don’t (although they should) choose a card based on which one has the lowest penalty APR. And as a result, banks can ratchet up those penalty APRs to eye-watering levels, and make lots of extra money, without worrying about losing market share.
Which is yet another reason why the Consumer Financial Protection Agency is an idea whose time has long since come.