Original scientific paper

Credit card spending limit and personal finance: system dynamics approach

Mirjana Pejić Bach orcid.org/0000-0003-3899-6707 ; University of Zagreb, Zagreb, Croatia
Jovana Zoroja orcid.org/0000-0003-2178-2913 ; University of Zagreb, Zagreb, Croatia
Marjana Merkač Skok ; Fakulteta za poslovne in komercijalne vede, Celje

Abstract

Credit cards have become one of the major ways for conducting cashless transactions. However, they have a long term impact on the well being of their owner through the debt generated by credit card usage. Credit card issuers approve high credit limits to credit card owners, thereby influencing their credit burden. A system dynamics model has been used to model behavior of a credit card owner in different scenarios according to the size of a credit limit. Experiments with the model demonstrated that a higher credit limit approved on the credit card decreases the budget available for spending in the long run. This is a contribution toward the evaluation of action for credit limit control based on their consequences.

Keywords

credit card; credit limit; system dynamics

Hrčak ID:

120191

URI

https://hrcak.srce.hr/120191

Publication date:

31.3.2014.

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