Credit card behavior , fi nancial styles , and heuristics ☆

a r t i c l e i n f o The paper makes four contributions. First, the paper provides new data and findings about credit card usage seg-mentation in respect to spending and borrowing behavior. Second, it sets the new findings against the backdrop of the newly emerging literature on financial literacy. A great variability occurs in financial literacy across American consumers. Third, the paper describes fast and frugal heuristics aimed to help consumers make effective , and in some cases better, budgeting decisions when they use credit cards. Fourth, the paper describes the introduction of a new set of online financial tools, offered by a large credit card company, which consumers are now using to make decisions about their spending and borrowing, and links these tools to the heuristics under discussion. Fast and frugal heuristics are likely to be especially valuable to consumers with low confidence in their online skills. Notably, 25% of credit cardholders report that they have low confidence using online technology to manage their finances, with the corresponding figure being 44% for those most at risk. By its nature, household decision making is a heuristic enterprise, as most household decision tasks are far too complex to be fully specified, let alone solved through optimization. In this paper, the authors discuss how households can use fast and frugal heuristics when using credit cards to engage in spending and borrowing. The paper makes four contributions. First, it provides new data and findings about credit card usage segmentation in respect to spending and borrowing behavior. Second, it sets the new findings against the backdrop of the newly emerging literature on financial literacy. Third, it describes fast and frugal heuristics aimed to help consumers make effective, and in some cases better, budgeting decisions when they use credit cards. Fourth, it describes the introduction of a new set of online financial tools, offered by a large credit card company, which consumers are now using to make decisions about their spending and borrowing. In this regard, it links these tools to the heuristics under discussion. As Bendor (2010) points out, Herbert Simon's bounded rationality approach has given rise to several research streams involving heuristics. Heuristics for household consumer decisions are ubiquitous. A large literature in marketing documents how households make use of heuris-tics that feature, for example, private labels and national brands (Putsis & Dhar, 2001), satisficing in respect to the …