An Empirical Study on Credit Card Usage

This paper is an empirical examination of the pattern of credit card usage and its implications for the profitability of the credit card companies. Using a detailed micro dataset obtained from one of the leading credit card companies, we first verify the validity of several conjectures regarding credit card usage of customers, and then try to compare the characteristics of the most and least profitable customers to the company. We then proceed to identifying occupational groups of the customers based on the purchasing pattern of customers. Finally, we attempt to replicate the credit card company’s own credit rating system using a simple regression, and successfully identify several important factors affecting the credit ratings of the customers. We believe that the paper plays an important role in providing substantial information on the factors affecting the credit rating of customers and on credit card usage at the micro level.