Credit card spending limit and personal finance: system dynamics approach
Abstract
Credit cards have become one of the major ways for conducting cashless transactions. However, they have long term impact to the wellbeing of its owner, trough the debt generated by the credit card usage. Credit card issuers approve high credit limit to credit card owners, therefore 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 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.
Key words: credit card, credit limit, system dynamics
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