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 7 Business inference comparison between BT and cash-back offers

		Payment		Spending		ΔCCC Bal.		ΔEFX Bal.		ΔPB Bal.
		Coef.	SE	Coef.	SE	Coef.	SE	Coef.	SE	Coef.	SE
Total cost = 0	Standard	2771.72	3059.33	512.34	940.6	1705.39	1367.38	2372.62	1557.19	135.81	148.04
Group A (PD = 6, fee > 0)	FFL	285.63	6.08*	2.22	0.13	−469.34	−8.85***	−419.10	−2.25	−48.35	−3.18
	PR	−146.46	−5.73*	−2.83	−0.29	281.83	9.78***	193.95	1.90	11.42	1.38
Group B (PD = 12, fee > 0)	FFL	55.69	0.58	−44.23	−1.13*	−33.54	−0.29	183.32	0.45	−32.33	−0.96
	PR	−44.31	−0.55	46.98	1.45***	−15.60	−0.16	−190.65	−0.56	33.19	1.19***
Group C (PD = 6, fee = 0)	FFL	92.96	1.90	10.81	0.56	−146.83	−2.70	179.78	0.95	−31.19	−2.06
	PR	−202.51	−5.59***	7.08	0.50	31.80	0.79	−262.48	−1.86	18.23	1.63
$500 Cash back	TR	48.7	54.5	61.7	68.9		27.5			23.3

This table reports the changes of payment, spending, change of balance caused by $500 cost of credit card company in different groups of BT offer and direct one-time cash back compared to the control group which does not contains any promotion. The magnitude of impacted dependent variables from BT offer is higher than the magnitude from one-time cash back based on the standard control. PD stands for promotional duration. ΔCCC Bal, ΔEFX Bal., and ΔPB Bal. stand for the change of balance in RBS bank, the change of balance in Equifax bureau, and the changed protected balance
In Group A, Δdebt of BT offer is six times of Δdebt of cash back, and the payment effect of BT offer is twice larger than cash back
In Group B, the payment effect is almost the same between BT offer and cash-back offer. The effect of ΔEFX balance is almost seven times the effect from cash back. Therefore, the longer PD stimulates the consumers’ purchase, and consumers accumulate a higher balance
In Group C, the payment and ΔCCC balance, ΔEFX balance effects are much greater than the effect from cash back. Thus, consumers are stimulated more by giving them a BT offer rather than giving them cash back
*, *** Coefficients are significant at the level of 10 and 5%