A theoretical examination of cash-back credit cards and their effect on consumer spending
The role of cash-back credit cards in personal financial strategies is highly debated. For example, Dave Ramsey (Ramsey, 2019) urges consumers to avoid even the most lucrative cash-back cards, while others argue that these cards offer significant savings. Herein, we construct models to analyze the u...
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Published in: | Financial services review (Greenwich, Conn.) Conn.), 2023-11, Vol.28 (3), p.222-242 |
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Main Authors: | , |
Format: | Article |
Language: | eng |
Online Access: | Get full text |
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Summary: | The role of cash-back credit cards in personal financial strategies is highly debated. For example, Dave Ramsey (Ramsey, 2019) urges consumers to avoid even the most lucrative cash-back cards, while others argue that these cards offer significant savings. Herein, we construct models to analyze the use of cash-back cards by rational consumers, demonstrating that cash-back cards increase spending (and, thus, reduce savings) for some consumers. While prior research focuses on behavioral issues related to credit cards, our research is the first to show that some consumers will rationally increase spending when using a cash-back credit card in lieu of cash. |
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ISSN: | 1873-5673 1057-0810 |