Financial Behavior of Credit Card Consumers – Uses & Misuses

Financial Behavior of Credit Card

Consumers – Uses & Misuses BA- 402 Methods In Business Research

Submitted To : Mr. Abdul Kabeer Kazi

Submitted By : Sartaj Ahmed Junejo

2/9/2013

FINANCIAL BEHAVIOR OF CREDIT CARD CONSUMERS – USES AND

MISUSES

by

SARTAJ AHMED JUNEJO

Course Supervisor

Mr. Abdul Kabeer Kazi

MBA Weekend (8) Dec, 2012 – Feb, 2013

Methods in Business Research (MBR)

KHADIM ALI SHAH BUKHARI INSTITUTE OF TECHNOLOGY

KARACHI, PAKISTAN

*INTRODUCTIONTORESEARCHER*

SARTAJ AHMED JUNEJO is belonging to a little village of district

Shikarpur Sindh. His village “DARO” is situated on main Indus

highway, and in the center of three district headquarters [Sukkur (49

KM), Shikarpur (30 KM), and Larkana (55 KM)].

Sartaj belongs to lower middle class family, his father is

primary pass, where uncles are post-graduates.

During the study in high school, He used to sell “GOLA

GANDA”, “CHOLA” went to streets of village being a hawker, after

school time. He passed his Matriculation in 1995, and got admission

in Pre-Medical but unfortunately he did not have sufficient numbers

to approve the medical college in 1997. During study of

Intermediate, to support his family, he was doing labor work in night

shift at rice mill, according to him very tough days of life. His

teachers are still like him because he was obedient, cleaver, and

deserving student.

He decided to work more, that he can support his family, in this view he drove to Karachi, and

got an employment on contract basis, but the income was not sufficient to survive, returned to home

and opened a Hotel of Tea, where he was owner, cooker, waiter, and sweeper (all in one).

He did graduation (B.A) in 2000. He applied various time in government departments but luck

was not with him, once he got part in PCS (SINDH PUBLIC SERVICE COMMISSION) examination and

passed, for clearing the VIVOCE bribe was demanded, he refused.

After passing the B.Ed in 2001, he decides in 2003 to doing job of teacher in Karachi, he closed

his hotel and travel to Karachi.

Unfortunately he was failed to find any job of teacher in Karachi. His uncle referred him to

shipping company (UMA) for getting experience; managers of company were happy from his work and

decide to appoint him as an employee.

He was appointed as an assistant in finance department for filing, gradually he got promotions

and at this moment he is serving as a “SENIOR ACCOUNTANT” he is enjoying here a handsome salary

package and other attractive incentives. During this job he got the degrees of B.Com and M.A

Economics, and company has arranged for him computer training “ICDL” in Dubai. He also enjoyed

foreign business trip.

Still he is continuing his study; recently he cleared 20th

paper of MBA, hope remaining 04 papers

will clear in Oct, 2013.

Financial Behavior of Credit Card Consumers – Uses & Misuses

Sartaj Ahmed Junejo Page i

APPROVAL AND DECLARATION SHEET

This research report titled FINANCIAL BEHAVIOR OF CREDIT CARD CONSUMERS –

USES & MISUSES was prepared and submitted by Sartaj Ahmed Junejo and has been found

satisfactory in terms of scope, quality and presentation as partial fulfillment for the requirement

of the course Methods in Business Research (MBR)

Checked and Approved by

________________________________

Assistant Professor Abdul Kabeer Kazi

Course Supervisor

Associate Dean, Faculty of Management Sciences (FMS)

KASBIT

MBA-W (8) Dec, 2012 – Feb, 2013


Sartaj Ahmed Junejo Page ii

Purpose: The purpose of this project is to conduct financial behavior of credit card

consumers – uses and misuses and its impacts on the financial performance of the credit card

industry.

Literature Review: The literature review reveal that credit cards have been used as a preferred

payment method in consumers’ life. Previous researchers have found that the credit card used by

consumers in different ways, some of customers used credit card in wrong way and some were

using it as an alternate source of income and mad payment on given time of period. Although the

misuses of credit card impacted the financial position of a credit card industry/banks also

creating the negative image of the same product for consumers as well.

Target Group: Target group is citizens of Karachi City.

Design/Methodology/Approach: Primary data for the project was collected through the

questionnaire duly filled by 50 (Fifty in Numbers) of respondents from Karachi Citizens.

Different statistical tools have been applied to analyze the responses from the respondents to

prove the objective and purpose of the project.

Findings: It is observed that respondent acknowledges the uses of the credit card in

everyday life. The respondents also acknowledged that banks are playing vital role in the

development and providing the facilities of credit card to Pakistani’s residents.

Conclusion & Recommendation: The credit card has been used in different ways. But the

misuse of a credit card has not only become a cause of financial losses for banking industry but

also creating a negative impact in peoples’ mind. To overcome these misuses, the credit card

industry/banks should implement the advance technologies and logical actions. Like finger print

technology, discounted offer and etc to develop the demand and value of the product (Credit

Card).

ABSTRACT


Sartaj Ahmed Junejo Page iii

I am gratified to ALLAH, the most beneficial, who gave me the strength and will to overcome

the obstacles surfaced during the completion of this report.

Making a report of this stature could not be possible without the grace of ALLAH and

continuous support of our course supervisor.

I feel exceptional warmth and gratitude in extending my appreciation for sincere and benevolent

guidance and patronage of the report to my course supervisor Mr. Abdul Kabeer Kazi. It was a

privilege to have an advisor who gave the freedom to explore on my own. His guidance at every

step of writing could not let my steps faltered. I am thankful to him for holding me to a high

research standard writing and for analyzing and rectifying my mistakes countless times. Also for

encouraging me too high when I considered myself to be in vain.

Last but not least; I would render great thanks to all respondents and others who in one way or

other co-operated with me to over the course of my research.

By

Sartaj Ahmed : 6631

MBA weekend (8) Dec, 2012 – Feb, 2013

ACKNOWLEDGEMENT


Sartaj Ahmed Junejo Page iv

Tables of Questionnaire Summary……………………………………………………………….14

Tables of Hypothesis Summary………………………………………………………………….19

Graphs of Hypothesis Analysis………………………………………………………………….22

Tables & Graphs of Statistical Tools Analysis………………………………………………….26

Questionnaire for Respondents…………………………………………………………………40

Tables of collected Data……………………………………………………………………..42-43

LIST OF TABLES & GRAPHS


Sartaj Ahmed Junejo Page v

Declaration….…………………………………………………………………………………..(i)

Abstract ………………..…………………………………………………………………….…(ii)

Acknowledgements………………………………………………………………………….....(iii)

List of Tables ………………………………………………………………………………......(iv)

Table of Contents………………………………………………………………………….……(v)

Chapter No. 1 --- Introduction …………………….…………………………………………(1)

1.1 Problem Definition..……………………………..……………………………………...(2)

1.2 Problem Statement……………………………………………………………………...(2)

1.3 Background……..………………………………………………………………………(2)

1.4 Research Objectives…………………………………………………………………….(2)

1.5 Research Question……………………………………………………………………...(3)

1.6 Purpose of Study………………………………………………………………………..(3)

Chapter No. 2 --- Literature Review…………………………………………………………(4)

2.1 Literature Review………………………………………………………………………(5)

2.2 Theoretical Frame Work……………………………………………………………….(6)

2.3 Research Hypothesis…………………………………………………………………...(8)

Chapter No. 3 --- Methodology……………………………………………………….…..…(9)

3.1 Problem Definition……………………………………………………………………(10)

3.2 Problem Statement…………………………………………………………………....(10)

TABLES OF CONTENTS


Sartaj Ahmed Junejo Page vi

3.3 Research Methodology……………………………………………………………..…(11)

3.4 Research Sample Design…………………………………………………………….(12)

Chapter No. 4 --- DATA Analysis.…………………………………………………………(13)

4.1 Questionnaire Summary…………………………………………………………….(14)

4.2 Hypothesis Summary………………………………………………………………..(19)

Chapter No. 5 --- Statistical Analysis………………………………………………………(21)

5.1 Hypothesis Analysis………………………………………………………………….(22)

5.2 Statistical Tools Analysis by Statistician……………………………………………(26)

5.3 Hypothesis Testing………………………………………………………..…………(30)

Chapter No. 6 --- Conclusion………………………………………………………………(32)

6.1 Chapter 1 > Introduction………………………………………………….(33)

6.2 Chapter 2 > Literature Review…………………………………..……..…(33)

6.3 Chapter 3 > Methodology…………………………………………..…….(33)

6.4 Chapter 4 > DATA Analysis……………………………………………...(33)

6.5 Chapter 5 > Statistical Tools………………………………………………(33)

Chapter No. 7 --- Recommendations………………………………………………………(34)

7.1 Final Words…………………………………………………………………………..(35)

7.2 Recommendations………………………………………………………………..….(35)


Sartaj Ahmed Junejo Page vii

Chapter No. 8 --- References………………………………………………………….……(37)

Chapter No. 9 --- Appendix………………………………………………………….……(39)

Questionnaires……………………………………………………………………….(40)

Statistical Data…………………………………………………………………….…(42)


Sartaj Ahmed Junejo Page 1

CHAPTER 1

I N T R O D U C T I O N



1. INTRODUCTION

1.1 Problem Definition

What are the financial effects of the misuse of the credit cards on bank’s financial?

1.2 Problem Statement

The misuses of the credit cards are unit quite common in Pakistan's market because of non-

documented economy. The financial losses rose for the establishment banks whereas customers

exploited their financial limits. The word exploited means that the withdrawal of money while

not having any purchase transactions. The customers usually perform this kind of transactions to

satisfy their daily expenses then unable to the liability.

1.3 Background

The credit card penetration rate in Pakistan has been slow considering that it is in the market for

over 20 years. One of the reasons for the initial slow growth rate was that the product was

targeted to the elite class which comprised of less than 10% of the population. But today the

market presents a different picture. With increased liquidity of banks, there has been an overall

push towards the supply of consumer finance that includes personal loan, house mortgage, credit

cards and auto loans. Today, consumer financing forms more than 25% of the total private sector

credit (Economic survey, 2006-2007) in Pakistan. (Chakravorti and Emmons 2001).

In Pakistan since the year 2000, there has been a massive reform in the financial sectors by

privatization and the restructuring of banks and financial institutions. According to the Economic

Survey of Pakistan 2007, the financial and insurance sector has seen a startling growth of 18.2%

despite the fact that government raised the interest rates over the last two to three years to control

the rising inflation in the country. In addition, State Bank of Pakistan (SBP) has laid out

stringent requirements for banks to get formal approval of those given credit and from the Credit

Information Bureau to keep a check on non-performing loans. (Tunah and Tatoglu 2010).

1.4 Research Objective

The objectives of the research were defined as:



To assess whether consumers are able to make informed choices when uses their credit

card

To examine consumers’ perceptions of the Credit Card Usage.

To understand consumer attitudes, motivations and expectations for using credit card

include the perceived benefits.

To find out what consumers know about the cost and terms and conditions/exclusions of

their Credit Card policy and when they were told.

To gauge overall satisfaction derived from usage of Credit Card.

To find out about availability, use and understanding of information both before and after

usage of credit card and the manner and extent of any research.

1.5 Research Question

What is the general perception about misuse of credit card?

What is the impact of interest rate on outstanding balance?

What is the impact of higher fees of credit card on individual’s income?

1.6 Purpose of the Study

The scope of the study is not limited to one consumer but the same approaches can also be used

of the other consumers as well. This study will be also providing the plate form for the

perception & attitude towards of consumer towards the credit cards credit cards. This research

will also server for students who wants to make their career. Credit cards are very useful for

helping to establish credit, and are invaluable when making certain purchases for which cash or

other forms of payment are not convenient. The new researches can also use this research for

their future research or use as source for future.



CHAPTER 2

L I T E R A T U R E

R E V I E W



2. LITERATURE REVIEW

2.1 Literature Review

Belcher (2004) addresses the rising problem of identity thieves targeting business records

containing personal identification about employees. The author provides a number of suggestions

for reducing the likelihood of workplace identity thefts and for protecting employees’ social

security numbers.

Bloch (2004) offers suggestions to internet retailers in protecting their online businesses from

fraudulent credit card purchases. Recommendations are given to request sufficient customer

identity data and to be aware of false email addresses and illegitimate shipping addresses. The

author also advises to analyze log files to catch questionable orders, to be wary of overseas

transactions in high risk regions, and to make anti-fraud policies visible to the customer.

Medintz (1998) focuses on credit monitoring services in this article and gives both advantages

and disadvantages of such. The author finds that few credit protection services are worth the

cost, stating that the risk of private information being stolen on the internet is often overblown

and consequences are not as severe as the credit monitoring agencies would lead consumers to

believe.

Dumiak (2000) discusses the issue of security against credit card fraud on the internet, especially

as e-commerce rises. The impact on advertising campaigns used by companies to address

consumers’ concerns for increased security is also discussed. American Express’ Private

Payments is singled out as an example of recent product developments to provide increased

protection against fraud.

Hogarth (2002) explains consumer complaint resolution and the elasticity of the credit card

market. Some pertinent information on the business dynamics of the credit card industry is

provided.

Surprisingly, there have been very few attempts to measure the connection between credit card

usage and levels of spending, perhaps because the endogenous problem is so difficult to solve.

Although prior cross-sectional research has found that consumers generally tend to spend more

with credit cards than with cash (e.g., Hirschman 1979) there are many reasons why this might

be the case, including that credit card users are different (e.g., more affluent) than users of cash.

Similarly, although the very limited prior experimental research examining the impact of credit

card use on spending has found some evidence of a positive impact, most of this research is



vulnerable to the possibility that cash users may have spent less due to liquidity constraints.

There have, however, been several empirical and theoretical investigations exploring closely

related issues.

One important line of inquiry has focused not on whether credit cards promote spending, but on

whether consumers under-predict their own credit card use and/or the level of credit card debt

they will accumulate.

In a subsequent study, Ausubel (1999) finds support for this “underestimation hypothesis” from

the results of market experiments conducted by a major bank in United States in which six

different preapproved credit card solicitations (with different introductory interest rates and

durations) were randomly mailed to potential customers. The major finding is that people end up

paying more interest in total because they over-respond to introductory interest rates, but pay

insufficient attention to (1) how long the introductory rate will be in effect and (2) the interest

rate that will go into effect at the end of the introductory period. Although the underestimation

hypothesis deals with miss predictions of spending rather than levels of spending with credit

cards (which is our interest), such under prediction would be consistent with a story in which

credit cards cause people to spend more but they fail to notice this effect.

2.2 Theoretical Frame Work

In this session, the variables of a credit card and why the use of a credit card does become a

misuse will be discussed in detail.

2.2.1 High Interest Rate

Interest rate is applied on the outstanding amount. Different credit card companies offer

different rates, in a fully competitive market a cardholder looks for a lower interest rate as

compare to other. A high interest rate affects to the individual income, as the rate of

interest increases the level of default customer increases or they switch to other credit card

offering a lowest interest. This is not only the loss of a credit issuer but cause the misuses

of credit cards.

On the other side, interest rate is the amount of additional fund that must be paid to the

lender beside the principal. Annual interest rate can affect on how big the profit of credit

card issuer. The credit card issuer will earn their profit as long as credit card holders do

not pay their entire credit card bill.



2.2.2 Checking Account

The effect of credit cards as on transaction balances might be negatively or positively

related to checking account balances. The ownership of credit card will have smaller

checking account, when the owner of credit card probably hold lower deterrent money

balances and hold their funds in an asset getting higher return than a checking account

while in anticipation of the credit card bill. The ownership of credit card could be

positively impacted to checking account when credit card holder withdraw smaller amount

since all of their transaction were covered by credit card.

As an alternate for money, credit card ownership also may make known a higher

propensity to consume. It happens when they consider lot of benefits could be taken from

the credit cards and then they consider that the credit cards as their additional income.

2.2.3 Variety of Fees

Companies can charge a variety of fees with the most common being annual, closure,

over-the-limit and late fees. Because, not all companies charge the same fees and the level

of the fees can also differ. Every person wants to pay minimum and get the more

advantages today thus a cardholder receive a heavy amount of fee he regret for a card and

must try to the get rid of that card and finally he collect the information and switch the

best one.

2.2.4 True Name As A Misuse

Misuse of a true name refers to new credit card accounts successfully opened by

individuals possessing a victim’s “true name” identification, i.e., driver’s license. The true

identification was either obtained as a secondary objective in the commission of a more

aggressive offense or as the primary target of a lesser crime. These frauds were

perpetrated most heavily with the Tops in-house card.

2.2.5 Balance Transfer of Credit Card

To avoid paying interest people are intentionally opened new low interest credit card

accounts and transferring their excessive balances. Transferring of balance is not a bad

idea but it would worry to the lenders because they favor customers who pay interest,

viewing customers who transfers debt over and over just because of paying interest. It

could create a bad reputation and in the future other lenders outside of the credit card

industry could ignore them when they are interested to borrow for shopping home or an

automobile.



2.3 Research Hypothesis

2.3.1 Hypothesis 01:

H0: Misuse of credit card has a negative impact on banking sector?

H1: Misuse of credit card has a positive impact on banking sector?


H0: High interest rate has a negative impact on credit outstanding balance?

H1: High interest rate has a positive impact on credit outstanding balance?


H0: Higher fees of credit card have negative impact on individual’s income?

H1: Higher fees of credit card have positive impact on individual’s income?


H0: There is no relationship between credit card fees and interest amount?

H1: There is a relationship between credit card fees and interest amount?



CHAPTER 3

M E T H O D O L O G Y



3. METHODOLOGY

3.1 Problem Definition

What are the financial effects of the misuse of the credit cards on bank’s financial?

3.2 Problem Statement

The misuses of the credit cards are unit quite common in Pakistan's market because of non-

documented economy. The financial losses rose for the establishment banks whereas customers

exploited their financial limits. The word exploited means that the withdrawal of money while

not having any purchase transactions. The customers usually perform this kind of transactions to

satisfy their daily expenses then unable to the liability.



3.3 Research Methodology

The methodology for the study of this project is briefly discussed below:

Research Design

3.3.1 The Purpose of Research

The purpose of research is Descriptive in nature.

3.3.2 The Type of Investigation

The type of investigation is Correlation.

3.3.3 Extent of Research Interference

The research interference is Moderate in nature.

3.3.4 The Study Setting

The type of study is Filed Study. The researcher will perform Field Experiment to

identify cause and affect relationship.

3.3.5 The Unit of Analysis

The unit of analysis is Banking Sector.

3.3.6 The Time Horizon

The time horizon is Cross Sectional.



3.4 Research Sample Design

3.4.1 Population

The Banking sector consists of 48 numbers of banks in Pakistan, while only

limited banks are doing the business with credit card.

3.4.2 Sampling Frame

Credit card users

3.4.3 Sampling Unit

Sampling unit is a Credit Card user.

3.4.4 Sampling Type

Sampling type is Direct Sampling

3.4.5 Sampling Size

Total 60

Selected 50

3.4.6 Sampling Plan

Researchers select all those, who are using credit card to conduct questionnaire to

verify the Hypothesis.



CHAPTER 4

D A TA

A N A L Y S I S



4. DATA ANALYSIS

4.1 Questionnaire Summary

Percentage Analysis of Questionnaire

Financial Behavior of Credit Card consumers – Uses & Misuses

1. Your Gender

2. In which area of Karachi do you live?

3. Where are you doing job?

4. Which sector have you chosen

Male

40

80%

Female

10

20%

North

13

26%

South

10

20%

East

17

34%

Central

10

20%

Self-Employed

02

4%

Private

48

96%

Government

0

0%

Service

26

52%

Manufacturing

24

48%



5. Your income level.

6. Have you ever used the Credit Card?

7. Which type of card is under in your usage?

8. What is frequency of card usage?

9. Where would you use credit card most often?

Up to 30 K

11

22%

31 K to 60 K

24

48%

61 K to 90 K

10

20%

Greater than

90K

05

10%

Yes

50

100%

No

0

0%

Master

16

32%

VISA

33

66%

AMEX

1

2%

Occasionally

15

30%

Once in a

Month

07

14%

2-5 times a

month

20

40%

More than 5

Times 08

16%

Shopping

31

62%

Restaurant

04

08%

Fuel Purchase

08

16%

Others

07

14%



10. Some of customers are misusing credit card.

11. Usage of credit card in wrong way is impacting on banking sector.

12. Banks will not effected, While Credit card is misused.

13. Banks are charging high interest rate on the credit cards outstanding balance.

14. Changes in interest rate is not directly effecting on credit cards interest rate.

Strongly

Disagree

05

10%

Disagree

05

10%

Neutral

18

36%

Agree

19

38%

Strongly Agree

03

06%

Strongly

Disagree

04

08%

Disagree

12

24%

Neutral

14

28%

Agree

18

36%

Strongly Agree

02

04%

Strongly

Disagree

07

14%

Disagree

20

40%

Neutral

16

32%

Agree

07

14%

Strongly Agree

0

0%

Strongly

Disagree

1

2%

Disagree

15

30%

Neutral

11

22%

Agree

17

34%

Strongly Agree

06

12%

Strongly

Disagree

0

0%

Disagree

06

12%

Neutral

09

18%

Agree

20

40%

Strongly Agree

15

30%



15. Payment of interest amount is a burden on individual income.

16. Banks are earing hidden revenues on credit cards, by using the term of annual fee.

17. Higher fee of credit card is not affecting the individual’s budget.

18. Credit card increases the probability of spending.

19. Interest rate is effecting on annual fees.

Strongly

Disagree

0

0%

Disagree

02

04%

Neutral

07

14%

Agree

30

60%

Strongly Agree

11

22%

Strongly

Disagree

02

04%

Disagree

04

08%

Neutral

06

12%

Agree

27

54%

Strongly Agree

11

22%

Strongly

Disagree

16

32%

Disagree

22

44%

Neutral

13

26%

Agree

20

40%

Strongly Agree

13

26%

Strongly

Disagree

02

04%

Disagree

02

04%

Neutral

13

26%

Agree

20

40%

Strongly Agree

13

26%

Strongly

Disagree

0

0%

Disagree

06

12%

Neutral

09

18%

Agree

20

40%

Strongly Agree

18

36%



20. Annual fee is impacting on interest rate.

21. Banks are charging the annual fee, to manage the interest rate.

Strongly

Disagree

16

32%

Disagree

22

44%

Neutral

04

08%

Agree

05

10%

Strongly Agree

03

06%

Strongly

Disagree

02

04%

Disagree

02

04%

Neutral

13

26%

Agree

20

40%

Strongly Agree

13

26%



4.2 Hypothesis Summary

Hypothesis 01:



Hypothesis 02:



Hypothesis 03:



Strongly

Disagree

02

04%

Disagree

07

14%

Neutral

34

68%

Agree

07

14%

Strongly Agree

0

0%

Strongly

Disagree

0

0%

Disagree

04

08%

Neutral

17

34%

Agree

18

36%

Strongly Agree

11

22%

Strongly

Disagree

0

0%

Disagree

04

08%

Neutral

30

60%

Agree

15

30%

Strongly Agree

01

02%



Hypothesis 04:



Strongly

Disagree

0

0%

Disagree

06

12%

Neutral

27

24%

Agree

16

32%

Strongly Agree

01

02%



CHAPTER 5

S T A T I S T I C A L

A N A L Y S I S



5. Statistical Analysis

5.1 Hypothesis Analysis




0

10

20

30

40

50

60

70

Strongly

DisagreeDisagree

NeutralAgree

Strongly

Agree

414

68

14

0

HYPOTHESIS 1 (DV)

4%

14%

68%

14%

0%

HYPOTHESIS 1 (DV)

Strongly Disagree Disagree Neutral Agree Strongly Agree






0

10

20

30

40

Strongly

DisagreeDisagree

NeutralAgree

Strongly

Agree

0

8

34 36

22

HYPOTHESIS 2 (IV 1)

0%

8%

34%

36%

22%

HYPOTHESIS 2 (IV 1)







0

10

20

30

40

50

60

Strongly

DisagreeDisagree

NeutralAgree

Strongly

Agree

08

60

30

2

HYPOTHESIS 3 (IV 2)

0%

8%

60%

30%

2%

HYPOTHESIS 3 (IV 2)







0

10

20

30

40

50

60

Strongly

DisagreeDisagree

NeutralAgree

Strongly

Agree

0

12

54

32

2

HYPOTHESIS 4 (IV 3)

0%

12%

54%

32%

2%

HYPOTHESIS 4 (IV 3)




5.2 Statistical Tools Analysis by Statistician




Z Test of Hypothesis for the Mean

DATA Null Hypothesis 3

Level of Significance 0.05

Population Standard Deviation 0.995188424

Sample Size 50

Sample Mean 2.36

Intermediate Calculations

Standard Error of the Mean 0.140740897

Z Test Statistic -4.547363382

Two-Tailed Test Lower Critical Value -1.959963985

Upper Critical Value 1.959963985

p-Value 5.43222E-06

Reject the null hypothesis

Results: Accept the alternate hypothesis

H1: Accepted

H0: Rejected










Sample Size 50

Sample Mean 2.34






p-Value 5.10025E-08



H1: Accepted

H0: Rejected










Sample Size 50

Sample Mean 2.84






p-Value 0.018094083



H1: Accepted

H0: Rejected










Sample Size 50

Sample Mean 2.34






p-Value 6.3339E-08



H1: Accepted

H0: Rejected



5.3 Hypothesis Testing




ANALYSIS: Since the Z test of Hypothesis for the Mean is 2.3 where u=3 and the level

of significance is 0.05, so we reject the null hypothesis because the intermediate

calculation which is negative, i.e. -4.547363382 and Two-Tail test p-value is less than

0.05 therefore we accept the alternative hypothesis. Therefore, it is concluded that there

is a significance difference between the misuses of credit card and banking sector.

Result: Accept the alternate hypothesis

H1: Accept

H0: Reject








is a significance difference between the Interest rate and outstanding balance of credit

card.


H1: Accept

H0: Reject










is a significance difference between the higher fees of credit card and individuals income.


H1: Accept

H0: Reject








is a significance difference between the credit card fees and interest amount.


H1: Accept

H0: Reject



CHAPTER 6

C O N C L U S I O N



6. Conclusion

6.1 Chapter 1 > Introduction

In the chapter of this research, the problem definition, Problem Statement, Background, Research

Objective, Research Questions and Purpose of the Study are given.

6.2 Chapter 2 > Literature Review

In the chapter two, the literature review is briefly discussed by different authors on timely basis.

The main factors of the credit card (causing of the financial losses) are discussed in the

Theoretical framework.

6.3 Chapter 3 > Methodology

In this chapter of methodology, we cover the core portion of the research, method and

formulation has been discussed through its problem definition and problem statement (discussed

in chapter 1). This chapter also covers the research design and research sample design.

6.4 Chapter 4 > DATA Analysis

Data analysis chapter covers the questionnaire that was filled by the respondents, data analysis

tools have been applied in order to prove the subject of the research through respondents reply on

hypothesis testing verified by the questionnaire, graphical representation of all questions

individually and summary of analysis.

6.5 Chapter 5 > Statistical Tools

Statistical tools analysis and techniques applied through responses gathered from the respondents

of questionnaire. A detailed graphical representation and result through responses on hypothesis

dependent questionnaire on main questions only. Hypothesis testing with its results and detailed

graphical representations.



CHAPTER 7

R E C O M M E N D A T I O N S



7. Recommendations

7.1 Final Words

It is observed that the misuses of a credit card have not only become a cause of financial losses

for a banking industry but also creating a negative impact in peoples’ mind. Bank must adopt

advance technology and take a logical action to develop the actual value of its product and to

protect credit card fraud as well as consumers can also minimize the abuses of credit card as

well.

7.2 Recommendations

� Although the credit card could play a vital role but due to interest rate on interest,

people are denying the valued product of a bank. To facilitate people, bank should

eliminate the interest rate and in alternate they must introduce the fee of service charges

on credit transaction to change the concept of interest. In this way whenever the

cardholder will make a transaction he must pay a fixed amount on a given period of

time.

� Credit card firm/banks and merchants those accepting their card have many means to

defense credit card fraud. To confirm the personal identification of credit card, finger

prints facility should be developed that can verify either the person using credit card is

the actual owner or an unauthorized one.

� A credit card industry/bank should plan a limitation on credit according to the

salary/income of card holder. Credit limit should be decided in such a way that those

people are in a high category of income they are facilitated a higher limit and those who

are in a low income they are motivated according their income. In this way people

would be appreciated to the product and their trust could be developed.

� A credit card industry/banks are facilitating many offers to its credit consumers like

cash back rewards and benefits which include free air miles, resort discounts, free

merchandise, reward points and options that are attracting to its consumers to frequently

use their credit card but if they would offer a discounted offer like, 2/10, net/52 or

collection on installment basis then this may not only develop their interest to the

product but bank can collect its payment in/on time and the losses could be reduced.



� The theft of credit card is not only a big loss of a card holder but bank also. To eliminate

this type of losses banks should adopt the technologies like finger print policy, when a

customer deal with or present a credit card, he/she must be liable to give a ginger print

to confirm the credit transaction and voice identification/secrete questions should be

asked while shopping through internet.



CHAPTER 8

R E F E R E N C E S



8. References

Ausebel, Lawrence M. “The Failure of Competition in the Credit Card Market.”

American Economic Review, 81,1, March 1991.

Calem, Paul and Mester, Loretta. “Consumer Behavior and the Stickiness of Credit Card

Rates.” American Economic Review, Dec. 1985.

Pecheco, B., & Sullivan, R. “Interchange Fees in Credit and Debit card Markets: What

Role for Public Authorities?” Economic Review 2006, 1, p87-113

Scholtes, S. “Obama in move to fulfill pledge on credit cards fees.” Financial Times.

April 23, 2009: p.5.

Woolsey, Ben and Schulz. “Credit Card statistics, industry facts, debt statistics,

“Consumer Statistics-Card ownership. Accessed April 3, 2009

http://www.creditcards.com/credit card-news/credit-card industry-facts-personal-debt-

statistics-1276-php

Chandran, C., Matthews, C,D., and Tripe, D.W.L. (2005). Competition in the New

Zealand credit card market from the consumer perspective. Journal of Asia Pacific

Business, 6(1), forthcoming.

Chien, Y.W., and DeVaney, S. A. (2001). The effects of credit attitude and socio-

economic factors on credit card and installment debit. Journal of Consumer Affairs,

35(1), p. 162-179.

Chakravorti, S. and Emmons W.R (2001) who pays for credit cards, Emerging Payments

Occasional Paper Series, EPS 2001-1 (4-6)

Tunah, T and Tatoglu, F.Y (2010) Factors affecting credit card uses, European journal

of economics, finance and administrative science, 23 (3-6)

Chein, Y.W and Devaney S.A (2001) The effects of credit attitude and socioeconomic

Factors on credit card and installment Debt, The jounal of consumer Affairs 35(1) (4-6)



CHAPTER 9

A P P E N D I X



Directions:

This survey assesses credit card consumers’ perceptions of financial activities. This questionnaire has

three sections, Section A is essential, where B and C are on choice. Please fill Section A and one optional.

Only outline measures and conclusions from this survey are according. Your participation is voluntary

and every one of your answer are unbroken trusted.

SECTION A

01. Your Gender

i. Male ii. Female

02. In which area of Karachi do you live?

i. North ii. South iii. East iv. Central

03. Where are you doing job?

i. Self-employed ii. Private iii. Government

04. Which sector have you chosen

i. Service ii. Manufacturing

05. Your income level.

i. Up to 30 K ii. 31K to 60 K iii. 61 K to 90 K iv. Greater than

90 K

06. Have you ever used the Credit Card?

i. Yes ii. No

If, “YES” than answer questions 7 to 19 and If, “NO” than go to section C

SECTION B

07. Which type of card is under in your usage?

i. Master ii. VISA iii. AMEX

08. What is frequency of card usage?

i. Occasionally ii. Once in a Month iii. 2 -5 times a month iv. More than 5 Times

09. Where would you use credit card most often?

i. Shopping ii. Restaurant iii. Fuel purchase iv. Others

10. Some of customers are misusing credit card.

i. Strongly Disagree ii. Disagree iii. Neutral iv. Agree v. Strongly Agree

QUESTIONNAIRES



11. Usage of credit card in wrong way is impacting on banking sector.


12. Banks will not effected, While Credit card is misused.


13. Banks are charging high interest rate on the credit cards outstanding balance.


14. Changes in interest rate is not directly effecting on credit cards interest rate.


15. Payment of interest amount is a burden on individual income.


16. Banks are earing hidden revenues on credit cards, by using the term of annual fee.


17. Higher fee of credit card is not affecting the individual’s budget.


18. Credit card increases the probability of spending.


19. Interest rate is effecting on annual fees.


20. Annual fee is impacting on interest rate.

ii. Strongly Disagree ii. Disagree iii. Neutral iv. Agree v. Strongly Agree

21. Banks are charging the annual fee, to manage the interest rate.


SECTION C

22. Would you like to avail credit card facility in future?

ii. Yes ii. No

Respondents I II III IV V VI VII VIII IX X XI XII XIII XIV XV XVI XVII XVIII XIX XX XXI

01 1 2 2 1 1 1 2 3 3 4 3 3 4 4 4 3 4 4 4 4 4

02 2 3 2 1 1 1 2 1 1 5 5 1 5 5 5 4 4 3 5 4 3

03 1 3 2 1 1 1 2 1 1 4 2 4 4 4 4 4 2 3 4 2 3

04 1 2 2 1 4 1 1 3 3 4 3 4 4 3 3 3 2 4 4 2 4

05 2 2 1 1 4 1 1 4 1 4 4 2 3 2 4 4 2 3 3 2 3

06 1 3 2 1 2 1 2 3 1 4 2 2 3 4 4 4 2 5 3 2 5

07 1 2 1 1 4 1 2 3 1 4 4 2 4 3 4 5 4 3 4 4 3

08 1 1 2 2 2 1 3 3 1 3 2 4 3 3 3 3 3 3 3 3 3

09 1 2 2 2 2 1 2 3 4 3 2 3 3 4 3 2 1 3 3 1 3

10 1 3 2 2 2 1 2 2 4 3 3 3 3 3 3 4 4 3 3 4 3

11 2 1 2 2 1 1 2 3 1 1 1 1 5 5 5 5 4 4 5 4 4

12 1 4 2 2 3 1 2 3 1 3 3 3 4 2 4 3 2 4 4 2 4

13 1 1 2 2 3 1 2 3 1 1 1 1 4 1 4 4 2 4 4 2 4

14 1 1 2 2 2 1 2 2 4 1 2 2 4 2 4 4 2 4 4 2 4

15 1 3 2 1 2 1 2 2 3 4 5 3 5 2 5 5 1 5 5 1 5

16 1 1 2 1 4 1 1 3 1 2 2 3 5 3 5 5 1 3 5 1 3

17 1 3 2 1 1 1 1 3 3 3 3 3 5 4 5 4 3 5 5 3 5

18 1 3 2 1 1 1 2 4 1 1 2 3 4 4 3 2 2 2 4 2 2

19 2 4 2 1 3 1 2 1 1 4 2 4 5 2 4 4 2 3 5 2 3

20 1 1 2 2 4 1 1 1 2 4 3 3 5 2 4 4 2 5 5 2 5

21 2 1 2 1 2 1 1 3 2 1 3 4 4 2 4 5 1 2 4 1 2

22 1 2 2 2 3 1 1 4 4 3 4 2 5 4 4 4 5 5 5 5 5

23 1 3 2 2 2 1 1 4 4 4 4 2 5 5 5 4 1 5 5 1 5

24 1 3 2 1 1 1 2 1 1 4 3 3 4 5 5 4 1 5 4 1 5

25 1 3 2 2 3 1 1 1 1 3 4 2 5 4 5 5 1 5 5 1 5

26 2 1 2 2 2 1 1 3 1 4 4 2 5 4 5 3 2 4 5 2 4

27 1 4 2 1 2 1 2 3 1 2 3 3 3 3 4 4 5 1 3 5 1

28 2 1 2 1 3 1 1 4 1 4 1 2 4 3 4 5 2 5 4 2 5

29 1 3 2 2 2 1 2 1 1 4 2 2 4 4 4 2 3 3 4 3 3

30 1 3 2 1 2 1 2 3 1 3 2 2 4 4 4 4 2 4 4 2 4

31 1 2 2 2 2 1 2 2 1 4 4 4 2 2 2 4 2 3 2 2 3

32 1 4 2 2 3 1 1 4 1 3 4 1 3 2 4 4 2 4 3 2 4

33 1 4 2 1 2 1 2 1 1 5 3 3 2 3 4 4 2 4 2 2 4

34 1 3 2 2 1 1 2 3 4 2 4 2 4 2 4 4 1 4 4 1 4

35 1 1 2 2 2 1 2 1 3 3 4 2 2 2 3 4 1 4 2 1 4

Questionaire Statistics

Financial Behavior of Credit Card Consumers - Uses & Misuses

Page 42 - 43

36 1 4 2 1 1 1 2 1 2 3 3 3 4 4 4 1 1 4 4 1 4

37 1 2 2 1 2 1 2 2 3 3 4 1 5 5 4 5 1 5 5 1 5

38 1 3 2 2 3 1 1 1 1 3 4 2 5 4 5 5 1 5 5 1 5

39 2 1 2 2 2 1 1 3 1 4 4 2 5 4 5 3 2 4 5 2 4

40 1 4 2 1 2 1 2 3 1 2 3 3 3 3 4 4 5 1 3 5 1

41 1 1 2 1 3 1 1 4 1 4 1 2 4 3 4 5 2 5 4 2 5

42 2 3 2 2 2 1 2 1 1 4 2 2 4 4 4 2 3 3 4 3 3

43 1 3 2 1 2 1 2 3 1 3 2 2 4 4 4 4 2 4 4 2 4

44 1 2 2 2 2 1 2 2 1 4 4 4 2 2 2 4 2 3 2 2 3

45 1 4 2 2 3 1 1 4 1 3 4 1 3 2 4 4 2 4 3 2 4

46 1 4 2 1 2 1 2 1 1 5 3 3 2 3 4 4 2 4 2 2 4

47 1 3 2 2 1 1 2 3 4 2 4 2 4 2 4 4 1 4 4 1 4

48 2 1 2 2 2 1 2 1 3 3 4 2 2 2 3 4 1 4 2 1 4

49 1 4 2 1 1 1 2 1 2 3 3 3 4 4 4 1 1 4 4 1 4

50 1 2 2 1 2 1 2 2 3 3 4 1 5 5 4 5 1 5 5 1 5

Page 42 - 43

Economy & Finance

Financial Behavior of Credit Card Consumers – Uses & Misuses