Effects of balance transfer offers on consumer short-term finance: evidence from credit card data

Journal of Economic Structures

The Official Journal of the Pan-Pacific Association of Input-Output Studies (PAPAIOS)

Table 4 Multinomial logit for consumers’ choices

Variables	Choose FFL offer		Choose PR offer		Choose both offers
Variables	Coef.	SE	Coef.	SE	Coef.	SE
FFL	−70.7e−02	0.04***	−9.98e−02	0.03***	−5.27e−02	0.08***
PR	7.34e−02	0.03*	−39.95e−02	0.02***	6.85e−02	0.07
PD	−5.13e−02	0.01***	15.38e−02	7.6e−03***	0.83e−02	0.02
BT fee	−0.85e−02	−7e−04***	−1.38e−02	5e−04***	−1.22e−02	1.5e−03***
PB balance	−4.87e−05	−1.89e−05***	7.14e−05	1.71e−05***	2.31e−05	4.06e−05
Finance charge	0.01	1.4e−03***	−3.9e−03	1.4e−03***	0.01	3.1e−03***
Fee	1.4e−03	2.7e−03***	0.03	2.1e−03***	0.01	4.6e−03***
Spending	6.62e−06	1e−04	−3e−04	6.58e−05***	2e−04	2e−04
Payment	−2e−04	4.87e−05*	4e−04	2.92e−05***	2.78e−05	9.9e−05
Cash spend	−9e−04	4e−04***	−4e−04	2e−04***	−6e−04	3e−04*
CCC #	−0.2	0.08***	−0.1	0.07	−0.15	0.18
EFX #	−1.48e−02	4.2e−03	6.8e−03	2.7e−03***	−3.4e−03	0.01
EFX limit	−1.25e−07	5.43e−07	4.17e−07	3.33e−07	−3.83e−06	1.71e−06***
CCC limit	−4.97e−05	7.24e−06	1.92e−05	5.09e−06	1.64e−05	1.54e−06
Behavior score	−1e−03	2e−04***	9e−05	1e−04	6e−04	4e−04*
FICO score	−5.89e−03	6e−04***	−1.3e−03	4e−04***	−6.3e−03	1.2e−03***
CCC U. ratio	−0.23	0.09***	−0.77	0.07***	−1.29	0.21***
EFX U. ratio	108.53e−02	0.15***	3.87e−02	0.13***	0.49	0.33

All characteristics are averaged. CCC # credit card numbers in RBS bank. EFX # the total number of credit cards from Equifax data. CCC limit the credit card limit in RBS bank. EFX limit a total card limit in Equifax data. Behavior score is the credit score calculated by RBS bank, and FICO score is the credit score from Equifax bureau. U utilization
From the table, consumers would like to reject the PR offers even when FFL increases. Therefore, FFL is a key parameter for consumers to make a choice of BT offer. Thus, FFL significantly impacts the consumers’ choice most at 5% confidence. PR increase leads to less acceptance of PR offer and more acceptance of the FFL offer. In sum, consumers with good credit records take advantage of the PR offer. In contrast, constrained consumers choose the FFL offer in order to enjoy a low interest rate. Consumers who choose both offers have good credit records but also high finance charges
*, *** Coefficients are significant at the level of 10 and 5%