#24 - Market analyst: According to my research, 59 percent

[moshei24]

The reason it's not (D) is because we have no way to assume that without adding unwarranted assumption on our end, right?

And (B) is correct because we know that not having to carry cash or write checks would be the main selling points? Just because 59% don't necessarily care about that isn't enough, because it still might be something that people are interested in, but the other things we know are more because 59% of people care about them? Am I off a little bit? Am I thinking too much into it? Can you clear it up, please?

Thanks!

[Nikki Siclunov]

No, the reason why (D) is incorrect is that consumers would definitely NOT ignore the length of time allowed to pay the balance due. Recall that most consumers anticipate being able to pay off their balance in full before interest charges start to accrue. Such customers will probably favor an extended deadline for paying their balance in full, as they can carry a balance for a bit longer without accruing interest. This would be especially helpful to customers who intend to pay off their credit cards in full, but have difficulty doing so before the current deadline.

(B) is correct given the customers' expectation to pay the entire balance before interest accrues. Whether credit cards charge 5% or 25% interest would be irrelevant if you never plan on carrying a balance on your card.

[moshei24]

And because it was 59%, and with at most 41% who care, it can't be the top priority?

[Rita]

Why is answer choice E incorrect? Given that customers intend to use cards only to avoid carrying cash/checks, it seems that a top priority for credit card companies would be to make that feasible by ensuring their cards are accepted in as many places as possible.

Thanks,
Rita

[Claire Horan]

Hi Rita,

Your reasoning makes sense, but notice that in your explanation you said "a top priority." Answer choice (E) reads "the most intense competition." In other words, (E) is incorrect because there is nothing in the stimulus that could lead you to conclude that where a credit card is accepted would be the single most important factor in the competition between credit card companies.

I hope this helps!

[dbpk]

Hello,

When I read "consumers anticipate paying off their credit card balances in full before interest charges start to accrue", I thought accrue=accumulate. So I thought it would be possible for consumers to maybe pay interest once but pay off their balance from keeping the charges from accumulating. This is why I eliminated B) because I thought interest rates could still be relevant.

How could I have read the stimulus, or particularly this sentence, meaning consumers would pay off their balances before ever even receiving and interest charge?

Thank you very much!

[AthenaDalton]

Hi dpbk,

You're correct to read "accrue" as "accumulate." The idea here is that a majority of consumers plan to pay off all of their credit card debt before any interest is charged to their account.

In general, credit card companies allow one month's worth of charges to add up, and then give the consumer the option of either paying back everything they charged that month interest-free, or only paying off a portion and paying interest charges on the remaining amount. So someone who makes $1000 in purchases in a month can either pay back the $1000 at the end of that month without being charged any interest, or they could just pay back some minimal amount (perhaps $50) and start seeing interest added to their total amount owed. If everything charged that month is paid back at the end of the month, no interest is charged.

If you're not familiar with credit cards, you could reason yourself to this conclusion by noting that the stimulus says consumers anticipate paying off their balances "before interest charges start to accrue," which indicates that the consumers will avoid paying any interest.

I hope that helps clarify things. Good luck studying!

[rgold3]

Can you please explain again why B is correct? Aren't interest rates important so the customers can pay off their bill in full?

[James Finch]

Hi R. Gold,

Credit cards only accrue interest charges if the statement balance at the end of the month isn't paid in full. According to the stimulus, 59% of consumers are going to pay the balance each month, meaning no interest would ever accrue on their credit cards. So the majority of consumers wouldn't care about the interest rates, since they don't expect to ever be dealing with them.

Answer choice (B) gets to the heart of this by combining the first premise with the second in the stimulus, that companies try to improve the services their customers are most interested in. Since the majority aren't interested in interest rates, it stands to reason that the companies wouldn't put too much effort into lowering the rates/making them more attractive for consumers.

Hope this helps!

[Katya W]

Hello all, I am wondering if someone could break down for me the reasoning behind A being an incorrect answer. I had it as a contender because if customers only used credit cards to not carry cash or use checks, and because they did not worry about interest rates, wouldn’t they also not care about which credit card they use, irrespective of the fact that credit card companies may be trying to incentivize them with services they may find interesting?