Social Equity in Credit Card Approval Analysis

Klein, Aaron, et al. “How Credit Card Companies Reward the Rich and Punish the Rest of Us.” Brookings, 9 Mar. 2022, www.brookings.edu/articles/how-credit-card-companies-reward-the-rich-and-punish-the-rest-of-us/.

This article written by Aaron Klein examines how credit card reward programs disproportionately benefit the wealthy and exacerbate economic inequality. Klein highlights the significant correlation between payment methods and personal income, noting that wealthier individuals, who qualify for elite credit cards, receive substantial rewards, while lower-income individuals often use debit cards or cash, which do not offer rewards. This source is useful for our project as it connects credit card eligibility with economic inequality, providing a concrete example of how financial systems contribute to wealth disparities. The article is reliable as it is published by the Brookings Institution, a nonprofit organization in Washington, D.C., dedicated to conducting research aimed at improving governmental policies. In addition, Klein draws on credible data from sources such as the Federal Reserve Bank of San Francisco and American Express’s financial records to support his arguments. Klein’s examination of the Supreme Court ruling that allows credit card companies to prevent merchants from passing on fees highlights the legal framework that perpetuates this inequality. This source will be helpful for our research project, allowing us to link credit card eligibility with broader concepts of capitalism and relate them to Marxist theories discussed in class. Furthermore, it will provide a perspective to expand the topic of credit card eligibility to further mitigate possible financial inequities.

Frankel, Robin Saks. “History of Women and Credit Cards: 1970s to Present.” Forbes, Forbes Magazine, 5 Dec. 2023, www.forbes.com/advisor/credit-cards/when-could-women-get-credit-cards/.

In this article written by Robin Saks Frankel, it discusses the general history of women and credit cards from the 1970s to the present and exposes the historical gender inequality issues in acquiring credit cards. Frankel explains that women were unable to apply for or own a credit card in their name until the passage of the Equal Credit Opportunity Act (ECOA) in 1974, a legislation enabling women to obtain credit cards independently. Highlighting the importance of credit for women, Frankel illustrates significant advancements in women's rights over the past decades. This article is a useful source due to its detailed exploration of legislative milestones and their impact on gender equality in finance. It compares favorably with other sources by providing specific historical context and policy insights. This source is credible as it is published on Forbes Advisor, a reputable financial news platform, and contains supported policy sources. This article's focus provides a framework to comprehend how legal changes have influenced women's financial independence. This context is critical for our project to link finances with theories such as feminism, economic justice, and intersectionality in credit card acquisition. The source illustrates the historical struggle for gender equality in finances, which will support our project's analysis of gender and finance.

Olen, Helaine. “Credit Card Interest Rates Are Stuck in the Past. It’s Time to Change That.” The Washington Post, 27 May 2022. https://www.washingtonpost.com/opinions/2022/05/27/credit-card-interest-rates-change/

This article by Helaine Olen explores the stagnant nature of credit card interest rates despite broader economic changes. Olen highlights how interest rates on credit cards have remained disproportionately high, often reflecting outdated financial policies that no longer align with the current economic environment. She argues that the credit card industry has resisted aligning interest rates with broader economic trends, such as declining loan interest rates. The article emphasizes the need for reform to ensure that credit card interest rates are fair and reflect contemporary economic realities. Olen's analysis is crucial for understanding how credit card companies continue to impose high-interest rates on consumers, which exacerbates financial burdens, particularly for lower-income individuals. The article provides a critique of the systemic issues within the financial sector that maintain these high rates and discusses the impact on consumer debt levels. The source is published in The Washington Post, a reputable news outlet known for its in-depth journalism and credible reporting. This source is relevant to our project as it provides insights into how credit card interest rates affect consumer financial stability and highlights the need for policy changes to address economic inequalities perpetuated by the credit card industry. The discussion aligns with broader socio-economic theories related to consumer rights and financial justice, offering a perspective on how outdated financial practices can impact credit card eligibility and economic equity.

Andriotis, AnnaMaria. “Credit-Card Companies’ New Customers: Subprime Borrowers.” The Wall Street Journal, 15 Aug. 2023. https://www.wsj.com/articles/credit-card-companies-subprime-borrowers-11660422048

AnnaMaria Andriotis' article discusses the increasing trend of credit card companies targeting subprime borrowers, who are individuals with lower credit scores. The article outlines how credit card issuers are expanding their market to include those traditionally seen as higher risk, offering them new credit opportunities despite their subprime status. Andriotis examines the motivations behind this shift, including the potential for higher profits through elevated interest rates and fees associated with subprime accounts. The article is informative for understanding how credit card eligibility criteria are evolving, especially in the context of market expansion strategies by financial institutions. Andriotis provides data on the growth of credit card offers to subprime borrowers and discusses the potential risks and benefits for both the consumers and the issuers. Published by The Wall Street Journal, a well-established financial news source, the article presents a credible and detailed analysis of current trends in credit card marketing strategies. This source is pertinent to our project as it highlights the changing landscape of credit card eligibility and the inclusion of subprime borrowers. It offers a critical view of how financial institutions adapt their strategies to increase customer bases while potentially exploiting the vulnerabilities of financially unstable consumers. The analysis ties into broader themes of financial inclusion and exploitation, providing a contemporary perspective on credit card eligibility and market dynamics.

CNBC Select. "What Issuers Look at on Credit Card Applications." CNBC, 13 June 2024, https://www.cnbc.com/select/what-issuers-look-at-on-credit-card-applications/.

This article from CNBC Select provides an in-depth analysis of the criteria credit card issuers use to evaluate applications. It highlights several key factors, including credit scores, income, employment status, and existing debts. The piece underscores the importance of credit history and utilization rates, explaining how these elements can influence an issuer's decision. Furthermore, it discusses the role of hard inquiries and how multiple applications within a short period can negatively impact approval chances. The article also offers practical advice for potential applicants, such as maintaining a low credit utilization rate and ensuring timely payments to improve their credit profiles. Additionally, it explains how different issuers might weigh these factors differently, adding nuance to the understanding of the approval process. By breaking down each factor, the article provides readers with a clear understanding of what issuers look for, helping them to better prepare their applications. This resource is particularly valuable for individuals looking to increase their chances of credit card approval by understanding and optimizing the factors within their control. The comprehensive nature of the article, combined with its practical tips, makes it an essential read for anyone navigating the credit card application process. Moreover, the article's accessible language and detailed breakdown make it suitable for a broad audience, from first-time applicants to those looking to refine their credit strategies. Overall, this piece serves as a crucial guide for anyone aiming to understand and succeed in the competitive world of credit card applications.

Lockert, Melanie. "Credit Card Approval: What Factors Matter?" Credit Karma, 1 Sept. 2023, https://www.creditkarma.com/credit-cards/i/credit-card-approval.

In this informative article, Melanie Lockert explores the essential factors that influence credit card approval, offering a detailed examination of six critical elements: credit scores, number of delinquencies, hard inquiries, credit card utilization rate, income, and credit history. The piece emphasizes that while credit scores are significant, they are not the only consideration in the approval process. Lockert explains how each factor plays a role in determining a borrower's creditworthiness. For instance, the article notes that a high credit utilization rate can negatively impact one's chances of approval, as it suggests over-reliance on credit. The discussion on income highlights its role in proving an applicant’s ability to repay debts, which is crucial for issuers. The article also provides practical advice for applicants, such as maintaining a low credit utilization rate, avoiding multiple hard inquiries within a short period, and ensuring timely payments to build a favorable credit history. This resource is particularly valuable for individuals seeking to understand the complexities of credit card applications and enhance their approval odds. The comprehensive yet accessible explanations make it an excellent guide for both novices and those looking to refine their credit management strategies. Overall, Lockert's article is an essential read for anyone navigating the credit card application landscape, providing clear insights and actionable tips to improve credit profiles and increase the likelihood of approval.

Horton, Michelle, et al. “How Flawed Data Aggravates Inequality in Credit.” Stanford HAI, 19 Nov. 2020, hai.stanford.edu/news/how-flawed-data-aggravates-inequality-credit.

Andrews’ article examines the impact of flawed data on credit scoring models and how it goes on to exacerbate inequalities for low-income or minority debtors. Despite the many advancements that have been made in AI for credit risk assessment, models still struggle with inaccuracies due to scant data suggesting that “thin” credit histories are often associated with disadvantaged groups. The research highlighted in the article, conducted by Laura Blattner and Scott Nelson, reveals that credit scores are 5 to 10 percent less accurate for specific low-income or minority populations, not because of inherent bias present in the algorithm, but rather due to insufficient data that fails to accurately predict creditworthiness. While analyzing this topic, the researchers utilized AI to test alternative credit-scoring models and found that even fine-tuned models did not significantly improve accuracy for minority and low-income groups. This underscores the problem of noisy data rather than biased algorithms. Improving the quality of credit data that is fed into models is suggested as a potential solution to reduce this disparity. The source is reliable as it is published by Stanford HAI, a reputable academic institution. It is highly relevant, addressing ongoing issues in AI and credit scoring as of 2021. Further, the article presents findings based on academic research without apparent bias, making it objective with references to specific studies in the field. This article is highly beneficial for understanding the challenges in credit systems, particularly regarding their impact on minority and low-income groups. In a capitalist system, access to credit is a crucial component of economic mobility and wealth accumulation. However, flawed data can impact marginalized communities, reinforcing systemic inequalities.

Solís, Alex, et al. “Bad Taste: Gender Discrimination in the Consumer Credit Market.” Inter-American Development Bank, Inter-American Development Bank, 8 July 2020, publications.iadb.org/en/bad-taste-gender-discrimination-in-the-consumer-credit-market.

Montoya, Parrado, Solís, and Undurraga’s paper examines the impact of gender discrimination in the consumer credit market. The study involved a randomized experiment in which loan requests of varying amounts were assigned to male and female prospective borrowers; these requests were then submitted to randomly assigned loan officers in Chile. The findings show that loan requests from women are 14.8 percent less likely to be approved compared to equivalent requests from men, despite women in Chile having higher repayment rates. Further analysis suggests that this discrimination is primarily driven by personal bias as opposed to incomplete statistical data. The study also demonstrates that male officers are responsible for most of the disparity. Finally, it estimates that 9.9 percent of expected bank profits are lost due to this discrimination, highlighting significant inefficiency costs. The source is reliable as it is published by the Inter-American Development Bank (IDB), a reputable banking institution. It is beneficial to understanding gender economics as it addresses contemporary issues of gender discrimination within the credit market as of 2020. The paper presents findings based on rigorous empirical data and randomized experiments, providing a robust analysis. This article is highly useful for understanding the challenges in credit systems, particularly regarding its impact on gender discrimination from a feminist perspective. It underscores the importance of creating equitable credit systems, contributing to the broader goals of achieving gender equality.

Pizzigati, Sam. “The Seven Square Inches Making Us Lots More Unequal.” Inequality.Org, inequality.org/great-divide/the-seven-square-inches-making-us-lots-more-unequal/. Accessed 20 June 2024.

This article investigates the intricate workings of credit card usage, showing how it aids the accumulation of wealth for the rich and corporate owners in America. It starts off by talking about how people often think of credit cards as a way to buy now and pay later with no interest if you pay on time, but explores more deeply how this process creates huge amounts of wealth that flow to the top persons in society. Among other things, it points out that higher-level managers in the credit card industry have significant executive compensation packages while “swipe fees'' paid by merchants are one of the largest revenue streams for such companies. Furthermore, cash-back rewards favor wealthy people who get high tax-free returns compared to others who gain little or none through lower-income individuals with bad credit score ratings. This further worsens economic inequality since merchandisers cannot transfer their higher swipe fees costs incurred while dealing with luxury card holders, which translates into increased prices for all customers. On top of this is the 2018 U.S Supreme Court ruling allowing credit card companies to keep imposing restrictions on swipe fee collections from retailers, thereby reinforcing this system. As a result, the economic divide between the wealthy and the average consumer continues to grow, highlighting the need for policy intervention to address these inequities.

Zahn, Max. “Credit Card Debt Has Reached a Record High. Here’s What It Means for the Economy.” ABC News, ABC News Network, 2023, abcnews.go.com/Business/credit-card-debt-reached-record-high-means-economy/story?id=104717977.

The third quarter of 2023 saw a 5% increase in credit card debt, bringing about record high levels and more borrowers defaulting on their payments; this happened among other reasons as per the report by the Federal Reserve. This rise in debt stands for reduced pandemic-induced savings of consumers who are grappling with higher prices. Under this financial pressure, low-income earners continue to be hardest hit because they find themselves trapped between high cost of living and interest rates, something that has forced them into relying on credit card borrowing to finance their daily expenses. A few economists perceive such a development as an early warning sign for economic frailty while others don't think it is much of a risk to the economy at large. The figures imply that consumer spending may be underpinned by some extent of borrowing and raise questions about whether this spending can be sustained in future. The report also reveals how severely inflation has affected low-income homes with huge credit card interest rates too, but these households' woes will not have major adverse consequences upon the larger economy since they are less than half total consumer expenditure. Additionally, the ongoing reliance on credit card debt to maintain consumer spending habits underscores the precarious financial situation for many households and the potential for increased financial instability if economic conditions do not improve.

Telford, Taylor. Apple Card Algorithm Sparks Gender Bias Allegations against Goldman Sachs, www.washingtonpost.com/business/2019/11/11/apple-card-algorithm-sparks-gender-bias-allegations-against-goldman-sachs/. Accessed 20 June 2024.

This article reports on allegations of gender bias in the Apple Card's algorithm, which emerged after entrepreneur David Heinemeier Hansson highlighted discrepancies between his and his wife's credit limits, despite her having a higher credit score. Hansson's public complaints on Twitter led to a regulatory investigation by the New York State Department of Financial Services. The article details the Hanssons' experience with Apple's customer service and the subsequent actions taken by both Apple and Goldman Sachs. It also touches on broader concerns regarding algorithmic bias in various industries, citing examples from companies like Google and Amazon. The inclusion of statements from both Goldman Sachs and regulatory officials adds to the reliability of the information. However, the article may exhibit some bias by focusing on high-profile individual cases rather than a comprehensive analysis of the algorithm's overall performance across a broader population. This source is highly to our research on factors affecting credit card eligibility, as it directly addresses issues of algorithmic bias and its impact on credit assessments. It highlights the potential for discrimination within automated decision-making processes, which is a critical consideration for our study. The article's insights into the regulatory response and public outcry also provide valuable context for understanding the societal and legal implications of biased algorithms. This information will be instrumental in shaping our analysis of the role of algorithms in credit eligibility and their potential biases.

Yearwood, Lori Teresa. “Many Minorities Avoid Seeking Credit Due to Generations of Discrimination. Why That Keeps Them Back.” CNBC, CNBC, 6 Sept. 2019, www.cnbc.com/2019/09/01/many-minorities-avoid-seeking-credit-due-to-decades-of-discrimination.html.

This article discusses the long-standing impact of discrimination on the credit-seeking behavior of minorities, particularly African Americans. It details how decades of bias from federal government and financial institutions have induced a trauma-like response, causing many people of color to avoid seeking credit. This avoidance further distances them from the credit-granting institutions they need to succeed, impacting their ability to secure favorable mortgage rates, credit terms, and even employment opportunities. The article provides examples of discriminatory practices, such as higher-priced car loans for minorities, and legislative efforts to address these issues, such as the Loan Shark Prevention Act. The article is a valuable source from CNBC, a reputable financial news outlet, providing an in-depth analysis of the systemic issues affecting minorities' access to credit. The article includes personal anecdotes, expert opinions, and statistical data, making it a well-rounded and reliable source. However, it may exhibit some bias by focusing heavily on individual stories of discrimination, which, while compelling, may not represent the experiences of all minorities. This source is relevant to our research on factors affecting credit card eligibility. It highlights the historical and ongoing discrimination that contributes to minorities' reluctance to seek credit, which is crucial for understanding the broader context of credit accessibility. The personal stories and expert insights provided in the article will help us illustrate the real-world impact of these systemic issues in our analysis. This information will be instrumental in shaping our understanding of the barriers minorities face in the credit system and in developing recommendations for more equitable credit practices.

Austin, Mike. "Marxist Criticism." The Critical Experience, Literary Reading, Writing and Criticism, Kendall/Hunt, 1994, pp. 194-213.

This paper outlines the fundamentals of Classical Marxism and some more recent variants of Marxism. Given that our project is arguing for socioeconomic equality in credit card approvals, Austin’s explanation of the Marxist duality of the base and superstructure, along with the insight that people can be financially motivated, is key to understanding components of our analysis such as income and car ownership affecting the credit card approval. Banks coming up with credit card approval systems might intend to meet the material needs of society, especially given that online transactions can be unreliable and not everyone can be trusted with a credit card. The twenty-first century has brought with it a wave of change in response to the digital disputes over money.Marxism may not have been created to be applicable to a globalized world in which cross-continental financial transactions occur within milliseconds, but it provides a guiding hand to our central narrative. Marxism makes clear that prolonged periods of socioeconomic unrest or disparity could result in systemic changes as the higher ups step out and carefully analyze it. With the increasing usage of credit cards, it has become clear that such change is in order soon on the credit card approval side of things as their is a lack of justice.

Akers, Douglas, et al. "Overview of recent developments in the credit card industry." FDIC Banking Rev. 17 (2005): 23.

While this paper fails to address the client side of the story, it provides a good overview of the oligopolistic credit card market in the United States up until 2005. A major incentive for banks to avoid certain customers is to maximize their revenue from interest payments. “Convenience users” – credit card holders who prefer to pay their balances in full by the end of each month – made up 55% of all card holders in 2005 and their numbers were rising. These users prohibit banks from increasing their revenues by avoiding debt, thereby not letting them profit. While banks clearly have an incentive to make policies that avoid users which are unlikely to fulfill their debt at all, they might also have a hidden incentive to avoid these convenience users.According to the paper , the top ten banks made up to 90% of the revenue in the market, with the likes of JP Morgan Chase and Bank of America. The paper also highlights general purpose card companies such as Mastercard and Visa forming an oligopoly, and credit cards being a large chunk of annual non-cash payments. These oligopolies prove troublesome in forming agreements on acceptance algorithms that are beneficial to the card issuer, but not the customer. The paper also highlights the growing number of agreements, such as MasterCard allowing third-parties to issue its cards to high-paying customers. These issues demonstrate that the credit card industry is run by a cartel which has the freedom to decide who gets their products and who doesn’t.