Reviews for The Economics of Federal Credit Programs

The average rating for The Economics of Federal Credit Programs based on 2 reviews is 3 stars.

Review # 1 was written on 2015-01-24 00:00:00 Tom Lang This book is a cousin to 'Nudge' by Thaler & Sunstein, using what we know about behavioral economics and heuristic biases to analyze the U.S. credit card industry. According to Mann, there is good evidence that credit cards cause (or perhaps merely enable) cardholders to spend more than the cardholder would using cash, check, or a debit card. He concludes this by comparing the saving, spending, debit, and financial distress trends across a number of rich countries -- each of which has a unique ratio of payment types. Credit cards also lead to over-borrowing, which increases financial distress. "Financial distress" is not the topic of this book, but anyone who has experienced it knows that it hurts third parties, eg, dependents of the who took on the debit. (The excellent documentary MaxedOut provides frightening illustrations.) Third party effects are important to policy makers -- at least to those respectful of libertarian thought -- because they justify regulation of otherwise-consensual arrangements (here, credit card contracts). What sort of regulation? Chapters 7 thru 14 (the most interesting ones) lean heavily on behavioral economics to suggest a handful of proposals to counteract the card company's attempts to hide the true costs of card usage. Mann suggests allowing merchants fees (charged to merchants by the card issuers) to be passed along to consumers, much like an ATM surcharge. He suggests invalidating universal default and other terms are difficult for consumers to price. Banning credit card marketing to minors and college students. Banning rewards programs. Requiring disclosure of certain fees at the time of purchase (rather than only earlier, at the time of contracting). And increasing mandatory minimum repayment levels.

Review # 2 was written on 2012-07-20 00:00:00 Gary Anderson This book is excellent. It contains all the basic information about how credit cards and debit cards work that someone with little knowledge would want to know, but it also has fascinating, cutting-edge policy recommendations. For instance, Mann suggests that customers should be told at the point of sale if the purchase will put them over their credit limit and cause them to incur a fee.