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

*INTRODUCTION TO RESEARCHER*
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
Disagree
Disagree
Neutral
Agree
Strongly
Agree
4
14
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
Disagree
Disagree
Neutral
Agree
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
Disagree
Disagree
Neutral
Agree
Strongly
Agree
0
8
60
30
2
HYPOTHESIS 3 (IV 2)
0%
8%
60%
30%
2%
HYPOTHESIS 3 (IV 2)

0
10
20
30
40
50
60
Strongly
Disagree
Disagree
Neutral
Agree
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

DATA
Null Hypothesis 3
Sample Size 50
Sample Mean 2.34
Two-Tailed Test
p-Value 5.10025E-08
H1: Accepted
H0: Rejected

DATA
Null Hypothesis 3
Sample Size 50
Sample Mean 2.84
Two-Tailed Test
p-Value 0.018094083
H1: Accepted
H0: Rejected

DATA
Null Hypothesis 3
Sample Size 50
Sample Mean 2.34
Two-Tailed Test
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

Financial Behavior of Credit Card Consumers – Uses & Misuses

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