The reading level for this article is All Levels
The statistical data on small business credit cards indicates a number of alarming facts that might one might not have even considered. Credit card transactions are a surprisingly insightful tool, as they, when compiled, show a large aggregative matrix of consumer tastes and preferences…and sometimes, those tastes reveal more than merely where one likes to buy clothes.
First, we have learned that racial discrimination, unfortunately, is still alive and well based on the distribution of credit. White business owners, it has been found, are twice as likely to be approved for a loan as black business owners and, when approved, black business owners are also more likely to be given higher interest rates. This phenomenon has been observed in Hispanics as well, though not to the same degree as African Americans. Most other minorities, such as women, have shown no statistical difference. Rates for approval of credit cards have also followed this trend.
Secondly, the data that we have on where credit cards are used suggests that fast food joints are curiously undesirable for fans of plastic. The quick and easy cash transaction, though not significantly much different physically than it is in other situations, is enough to make credit cards an almost unused practice at the drive through.
Thirdly, we have an insight into the repayment habits of more liberal credit card users. In the Freakonomics blog , the psychological effect of the minimum credit card payment has been analyzed and is said to produce a very interesting impact on the payment tendencies of the users: credit card users who do not automatically pay their bills in full tend to pay down less than they would ordinarily when confronted with the minimum payment option. In fact, the lower the payment, the less likely it is that the user will put down as much, or even any money toward the repayment of the debt. The minimum payment, in effect, acts like a mental anchor that keeps looser card users from paying their debts…and effectively results in a much higher interest rate over all. The data indicates that credit card companies effectively double their interest rate with these practices.
Finally, the statistical data on small business credit cards shows us that the status symbol effect is more personal than we think it is. For the most part, we are not just nonreactive, but actually quite unconscious to the caliber of credit card that our friends are whipping out over the dinner table. We know that people who apply for high caliber credit cards are basically doing it for themselves, as they do not have the same effect as clothes or cars.
