---
area: "society-thinking"
category: finance
companies_orgs:
- Visa
- Mastercard
- Capital One
- JPMorgan
- Alphabet
- Meta
- Goldman Sachs
- New York Fed
date: '2025-11-28'
draft: true
guest: ''
insight: ''
layout: post.njk
people:
- Joe Weisenthal
- Tracy Alloway
- Jerome Powell
project: []
series: ''
source: https://www.youtube.com/watch?v=85retuUVCN8
speaker: Bloomberg Podcasts
status: evergreen
summary: 本期访谈深入剖析了美国信用卡利率高达 23% 的深层原因。沃顿商学院教授 Itamar Drechsler 指出，高利率并非主要由违约风险驱动，而是由高昂的商户交换费、巨额的营销开支以及消费者对利率变化不敏感的行为共同支撑。文章对比了个人信用贷款等更低成本的替代方案，揭示了信用卡业务作为银行业中投资回报率（ROI）最高的部门的运作逻辑，并探讨了宏观政策对该领域的影响。
tags:
- business
- consumer-behavior
- interchange-fee
- rate
- risk
title: 信用卡利率为何居高不下？揭秘发卡银行的隐秘收入与消费者行为
---
### 信用卡利率的悖论：消费者对政策利率的敏感度

At the risk of sounding, heretical here,
I am not a huge believer
that consumers at all are very sensitive
to these changes in the in the policy rate
and the fed funds rate,
even though the standard model works
through their intertemporal consumption
savings decision,
I think the evidence is very weak
that they care about that.
And then the credit card,
I think, on top of that
is really makes this clear,
because if you're paying 23%
and you are the kind of person
that wants to to borrow,
how much is a half a percent
going to matter to you if the fed hikes?
Plus you could have
been getting a much cheaper rate anyway
and that didn't compel you to go looking
for it.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">At the risk of sounding, heretical here,
I am not a huge believer
that consumers at all are very sensitive
to these changes in the in the policy rate
and the fed funds rate,
even though the standard model works
through their intertemporal consumption
savings decision,
I think the evidence is very weak
that they care about that.
And then the credit card,
I think, on top of that
is really makes this clear,
because if you're paying 23%
and you are the kind of person
that wants to to borrow,
how much is a half a percent
going to matter to you if the fed hikes?
Plus you could have
been getting a much cheaper rate anyway
and that didn't compel you to go looking
for it.</p>
</details>

Hello and
welcome to another episode of the Odd
Lot podcast.
I'm Joe Weisenthal. And I'm Tracy Alloway.
Tracy, are you good about like, frequent
flier miles and hotel rewards and cashback
and using your credit card
to get like good seats
at the US open, like all the or dining.
Are you good about maximizing that stuff?
Nope, I am not. I'm trying to be better.
You know, I'm
finally signing up to a bunch of frequent
flier programs and things like that.
But in general,
I am not a, a points strategy.
Some people get really into it.
No, I do not.
I do have I have a very busy life.
I do not have mental health energy
towards, you know, maximizing points
or learning about the newest cards
like, oh, is this card worth a $400 fee?
Because I can get upgraded
to platinum faster this year.
I do not want to think about that stuff.
I'm not that interested,
but I get the impression that like,
that means I'm probably paying for someone
who is or something like that.
Or maybe, you know, I'm
paying these fees on my credit cards
or these interchange fees, etc..
Maybe I'm leaving money on the table
by not doing it, I don't know.
I find credit cards
to be a weird business.
Like I don't really know
what visa does relative to say, the bank
that issues a visa card, etc..
I don't know how they slice them.
I don't know anyone credit cards.
It's a very opaque business. Yeah, sure.
It's a weird business.
I would say like it's competitive,
but also it's like not,
you know, like everyone's
kind of doing the same things.
Yeah, in many ways.
So we should talk about it.
It's also,
I imagine, kind of sticky in the same way
that deposits at banks are sticky.
We spoke with Joe Barty about that
a while back.
So so I don't cycle through them
a bunch and stuff like that.
And there's so much
credit card advertising.
I don't know what's good or bad
or whatever.
Yeah, look,
I use my credit card as a payment card
because I don't really I don't carry
a balance from month to month.
I don't I don't know anything
about interest rates or whatever.
I pay it off at the end of every month
because I just basically use it
for payments, etc..
so I just don't know much about them.
But they're a huge major consumer
financing source.
Yeah, I never want to talk about
fintech and Bnpl
and all these other things
and stablecoins, coins
and all this other stuff,
and it's like, yeah, but the big one
who's talking about the big one?
Credit cards? Well, that's the thing.
So points have become a bigger attractant
I guess to credit cards.
And so people are spending more
with their credit cards
and carrying a bigger balance, which means
that the rate that you're paying on
the credit card is actually more
important, potentially,
than something like your mortgage rate.
Totally.
Well, very pleased to say we do, in fact,
have the perfect guest,
someone we've had on the podcast before.
I think
last time we were talk about Red Q,
which is a bank lending in the 70s.
I like his work
because he goes back to the simple things
like,
let's just talk about how this works.
Let's talk about how this works,
because I think we move on to quickly
without sort of understanding the basics.
Maybe there are stones left unturned.
Literally the perfect guest,
Itamar Drexler.
He is a finance professor at Wharton,
and he was the coauthor of a fairly recent
paper, sort of looking at the question of
why are credit card rates so high?
Because if you actually do borrow
from them, sometimes the rates are like
20 something percent seems way
higher than any other sort of lending.
So it.
Amar, thank you so much
for coming back on Odd Lot.
Thank you very much. It's,
it's really nice, to be back.
Thank you for having me.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Hello and
welcome to another episode of the Odd
Lot podcast.
I'm Joe Weisenthal. And I'm Tracy Alloway.
Tracy, are you good about like, frequent
flier miles and hotel rewards and cashback
and using your credit card
to get like good seats
at the US open, like all the or dining.
Are you good about maximizing that stuff?
Nope, I am not. I'm trying to be better.
You know, I'm
finally signing up to a bunch of frequent
flier programs and things like that.
But in general,
I am not a, a points strategy.
Some people get really into it.
No, I do not.
I do have I have a very busy life.
I do not have mental health energy
towards, you know, maximizing points
or learning about the newest cards
like, oh, is this card worth a $400 fee?
Because I can get upgraded
to platinum faster this year.
I do not want to think about that stuff.
I'm not that interested,
but I get the impression that like,
that means I'm probably paying for someone
who is or something like that.
Or maybe, you know, I'm
paying these fees on my credit cards
or these interchange fees, etc..
Maybe I'm leaving money on the table
by not doing it, I don't know.
I find credit cards
to be a weird business.
Like I don't really know
what visa does relative to say, the bank
that issues a visa card, etc..
I don't know how they slice them.
I don't know anyone credit cards.
It's a very opaque business. Yeah, sure.
It's a weird business.
I would say like it's competitive,
but also it's like not,
you know, like everyone's
kind of doing the same things.
Yeah, in many ways.
So we should talk about it.
It's also,
I imagine, kind of sticky in the same way
that deposits at banks are sticky.
We spoke with Joe Barty about that
a while back.
So so I don't cycle through them
a bunch and stuff like that.
And there's so much
credit card advertising.
I don't know what's good or bad
or whatever.
Yeah, look,
I use my credit card as a payment card
because I don't really I don't carry
a balance from month to month.
I don't I don't know anything
about interest rates or whatever.
I pay it off at the end of every month
because I just basically use it
for payments, etc..
so I just don't know much about them.
But they're a huge major consumer
financing source.
Yeah, I never want to talk about
fintech and Bnpl
and all these other things
and stablecoins, coins
and all this other stuff,
and it's like, yeah, but the big one
who's talking about the big one?
Credit cards? Well, that's the thing.
So points have become a bigger attractant
I guess to credit cards.
And so people are spending more
with their credit cards
and carrying a bigger balance, which means
that the rate that you're paying on
the credit card is actually more
important, potentially,
than something like your mortgage rate.
Totally.
Well, very pleased to say we do, in fact,
have the perfect guest,
someone we've had on the podcast before.
I think
last time we were talk about Red Q,
which is a bank lending in the 70s.
I like his work
because he goes back to the simple things
like,
let's just talk about how this works.
Let's talk about how this works,
because I think we move on to quickly
without sort of understanding the basics.
Maybe there are stones left unturned.
Literally the perfect guest,
Itamar Drexler.
He is a finance professor at Wharton,
and he was the coauthor of a fairly recent
paper, sort of looking at the question of
why are credit card rates so high?
Because if you actually do borrow
from them, sometimes the rates are like
20 something percent seems way
higher than any other sort of lending.
So it.
Amar, thank you so much
for coming back on Odd Lot.
Thank you very much. It's,
it's really nice, to be back.
Thank you for having me.</p>
</details>

When I was doing some prep
for this episode.
There is not a ton of actually,
like, fresh
academic work on the credit card industry.
There's not a ton of papers,
but it's this huge space.
Why did you see a reason to go back
and revisit this sort of basic,
simple question of looking
at interest rates on credit cards?
Yeah.
So, my interest is usually,
like we talked about when I was, here
last time as monetary policy
macro and a lot of banking.
And I had some students who
are coauthors now, you know, on this paper
come and wanted a couple of years ago.
I want to talk about fintech
because fintech is a very popular topic.
And then I was thinking, well,
how do we sort of analyze fintech
and what's the potential, room for fintech
to grow if we don't really understand
how the dominant incumbent
players are credit card, banks, work.
And then we look at this
and I was very surprised to see something
kind of simple,
which is that the return on assets
for credit card banks are just way
higher than the average bank.
So bank rates are typically,
you know, 11. 2%.
They move a couple of basis points.
A very exciting,
credit card banks are always and you know,
most banks are had just credit cards.
So, so it's actually even higher than this
are in the three and a half often 4%.
So it's very shocked by this okay.
How come it's so high
when it's so hard to squeeze out
a couple of basis points and then,
you know, one of the reasons
is just to charge really high
rates, like, okay,
how did I get away with this?
You know what is going on here?
Just very simple question
about how to decompose that rate
into the pieces
and kind of what's left over at the end.
Okay.
So lots to talk about in the theme of
or in the spirit of starting at basics,
walk us through the revenue
that credit card issuers or credit card
banks are actually earning,
the different types
and who the players are in the system.
Yeah.
So, so let's separate
first into two categories.
One are people who revolve their balance.
And that's
what most of the paper's about is.
I think that's the more interesting part.
And there's more details.
And it's kind of
how the banking part of it,
and there are actually
a lot of people who revolve,
often I find people are surprised
to hear this, but,
about 60% of the credit card users
actually revolve,
so meaning that they don't pay in
the grace period at the end of the month.
And so they're hit with these, very high,
usually interest charges.
And then the other part are,
you know, what people call trans actors.
So they're the kind that do pay
during the grace period.
So they're not, paying interest. Okay.
So for the revolvers, you there's again
multiple parts.
So you pay interest on the balance
that you have.
But before then and now there's the part
where which applies both to the trans
actors and revolvers.
When you swipe the card,
then there's immediately
a percentage taken up
called the swipe fee.
And that is split
up into a bunch of pieces.
So one of the ones that I used
to be aware of that most people are aware
of is the is the card network
like visa, Mastercard, Amex.
There was discover,
which is now part of Capital One.
And that's,
you know, there's a whole menu, but
basically it's like 15, 20 basis points.
Okay, okay.
Doesn't sound like a lot,
but there's like $10 trillion of purchases
between debit and credit cards.
It turns out when you take 20 basis
points of $10 trillion kind of adds up.
Nice. It's nice if you can get it.
It's really nice, actually.
Be surprised that usually visa
and JPMorgan are the two most valuable.
Financial services firms.
They change who's number one.
So visa is, you know, been worth over $600
billion.
It's a lot.
Yeah.
So, and Mastercard's gigantic to,
so there's that.
Then the majority of that swipe
fee, the, the majority of the remainder
actually goes to the bank
that issued the card to the consumer.
So that's called the interchange fee.
And it's again, they don't make this
like very easy to tell.
But in our data sets it's a little over
1.8% on average.
I think it's largely
been trending up over time slowly.
And so the bank gets that
actually gets the vast majority of that.
And then they pay your rewards
and things from that.
A lot of that goes to just passes
through to the rewards and things.
And they keep a small portion of it,
for themselves.
But the big part of their business,
where most of the money comes from,
that we analyze here, is the
is that all these people
that revolve, they pay an interest rate,
and that interest rate
now is, on average, 23%. Wow.
Which is
just seems like a shockingly high number.
I mean, I guess I've seen that it
just when you think when you do,
when you work on assets and like,
you know, think the kind of things
you guys talk about bonds and bonds pay,
you know, whatever, 5% high yield.
You know, investment
grade spread is not even 80 basis points.
Now on top of it.
High yield spreads under 3%.
Like how do I how do we get the 23%. Yeah.
When you hear this number 23%.
Yeah.
And you think about the fact
that credit card users are sort of,
can be decomposed into actors
and revolvers, right.
My first instinct would be, well,
the trans actors are very on the ball.
They're like, not credit risks.
I've always been, just a trans actor.
I've never revolved.
How much of that, increased spread
can just be explained
by likelihood of default
from the revolvers,
which I presume are perhaps a little more,
you know, financially precarious
and maybe less financially sophisticated.
Right. So, yeah.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">When I was doing some prep
for this episode.
There is not a ton of actually,
like, fresh
academic work on the credit card industry.
There's not a ton of papers,
but it's this huge space.
Why did you see a reason to go back
and revisit this sort of basic,
simple question of looking
at interest rates on credit cards?
Yeah.
So, my interest is usually,
like we talked about when I was, here
last time as monetary policy
macro and a lot of banking.
And I had some students who
are coauthors now, you know, on this paper
come and wanted a couple of years ago.
I want to talk about fintech
because fintech is a very popular topic.
And then I was thinking, well,
how do we sort of analyze fintech
and what's the potential, room for fintech
to grow if we don't really understand
how the dominant incumbent
players are credit card, banks, work.
And then we look at this
and I was very surprised to see something
kind of simple,
which is that the return on assets
for credit card banks are just way
higher than the average bank.
So bank rates are typically,
you know, 11. 2%.
They move a couple of basis points.
A very exciting,
credit card banks are always and you know,
most banks are had just credit cards.
So, so it's actually even higher than this
are in the three and a half often 4%.
So it's very shocked by this okay.
How come it's so high
when it's so hard to squeeze out
a couple of basis points and then,
you know, one of the reasons
is just to charge really high
rates, like, okay,
how did I get away with this?
You know what is going on here?
Just very simple question
about how to decompose that rate
into the pieces
and kind of what's left over at the end.
Okay.
So lots to talk about in the theme of
or in the spirit of starting at basics,
walk us through the revenue
that credit card issuers or credit card
banks are actually earning,
the different types
and who the players are in the system.
Yeah.
So, so let's separate
first into two categories.
One are people who revolve their balance.
And that's
what most of the paper's about is.
I think that's the more interesting part.
And there's more details.
And it's kind of
how the banking part of it,
and there are actually
a lot of people who revolve,
often I find people are surprised
to hear this, but,
about 60% of the credit card users
actually revolve,
so meaning that they don't pay in
the grace period at the end of the month.
And so they're hit with these, very high,
usually interest charges.
And then the other part are,
you know, what people call trans actors.
So they're the kind that do pay
during the grace period.
So they're not, paying interest. Okay.
So for the revolvers, you there's again
multiple parts.
So you pay interest on the balance
that you have.
But before then and now there's the part
where which applies both to the trans
actors and revolvers.
When you swipe the card,
then there's immediately
a percentage taken up
called the swipe fee.
And that is split
up into a bunch of pieces.
So one of the ones that I used
to be aware of that most people are aware
of is the is the card network
like visa, Mastercard, Amex.
There was discover,
which is now part of Capital One.
And that's,
you know, there's a whole menu, but
basically it's like 15, 20 basis points.
Okay, okay.
Doesn't sound like a lot,
but there's like $10 trillion of purchases
between debit and credit cards.
It turns out when you take 20 basis
points of $10 trillion kind of adds up.
Nice. It's nice if you can get it.
It's really nice, actually.
Be surprised that usually visa
and JPMorgan are the two most valuable.
Financial services firms.
They change who's number one.
So visa is, you know, been worth over $600
billion.
It's a lot.
Yeah.
So, and Mastercard's gigantic to,
so there's that.
Then the majority of that swipe
fee, the, the majority of the remainder
actually goes to the bank
that issued the card to the consumer.
So that's called the interchange fee.
And it's again, they don't make this
like very easy to tell.
But in our data sets it's a little over
1.8% on average.
I think it's largely
been trending up over time slowly.
And so the bank gets that
actually gets the vast majority of that.
And then they pay your rewards
and things from that.
A lot of that goes to just passes
through to the rewards and things.
And they keep a small portion of it,
for themselves.
But the big part of their business,
where most of the money comes from,
that we analyze here, is the
is that all these people
that revolve, they pay an interest rate,
and that interest rate
now is, on average, 23%. Wow.
Which is
just seems like a shockingly high number.
I mean, I guess I've seen that it
just when you think when you do,
when you work on assets and like,
you know, think the kind of things
you guys talk about bonds and bonds pay,
you know, whatever, 5% high yield.
You know, investment
grade spread is not even 80 basis points.
Now on top of it.
High yield spreads under 3%.
Like how do I how do we get the 23%. Yeah.
When you hear this number 23%.
Yeah.
And you think about the fact
that credit card users are sort of,
can be decomposed into actors
and revolvers, right.
My first instinct would be, well,
the trans actors are very on the ball.
They're like, not credit risks.
I've always been, just a trans actor.
I've never revolved.
How much of that, increased spread
can just be explained
by likelihood of default
from the revolvers,
which I presume are perhaps a little more,
you know, financially precarious
and maybe less financially sophisticated.</p>
</details>

### 信用卡收入构成：谁是主要受益者？

Itamar Drechsler (ID):
Right. So, yeah.
So I think if you don't, you know,
like me, you didn't know much about this.
Your assumption is,
I think that most financial economists,
they would the first thing
they would think is, well,
it must be that the most of the remainder
is, charge offs.
Right? Defaults.
And that's not true.
So you can find that pretty easily.
So the average charge off
rate on the, on the revolvers okay.
So when you look at it let's say
you look it up online, you'll see kind of
you know
relative to the whole balance sheet.
So includes both groups.
And like you're saying
by definition trans actors don't borrow
so they can't default.
That's a bit that kind of makes it
go down a little bit.
But the majority are revolvers.
So if we kind of clean that out,
then on average in our sample, it's
5.75% of balances are charged off.
So it's not trivial by any means.
It's that's a high number.
But again
we were talking about 18% spread.
So if you think oh it must be about 18%
charge, it's not even close.
And it's never been that high.
So so you might think, well maybe it's
just you know, so that's on average.
But sometimes it'll spike to be ridiculous
numbers.
It will.
It does spike
but not for very long periods of time.
So the bottom line is it's not.
That's a big chunk.
That's a substantial chunk of it,
but not even close to a majority of it.
So you know people default
but they don't default that much.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Right. So, yeah.
So I think if you don't, you know,
like me, you didn't know much about this.
Your assumption is,
I think that most financial economists,
they would the first thing
they would think is, well,
it must be that the most of the remainder
is, charge offs.
Right? Defaults.
And that's not true.
So you can find that pretty easily.
So the average charge off
rate on the, on the revolvers okay.
So when you look at it let's say
you look it up online, you'll see kind of
you know
relative to the whole balance sheet.
So includes both groups.
And like you're saying
by definition trans actors don't borrow
so they can't default.
That's a bit that kind of makes it
go down a little bit.
But the majority are revolvers.
So if we kind of clean that out,
then on average in our sample, it's
5.75% of balances are charged off.
So it's not trivial by any means.
It's that's a high number.
But again
we were talking about 18% spread.
So if you think oh it must be about 18%
charge, it's not even close.
And it's never been that high.
So so you might think, well maybe it's
just you know, so that's on average.
But sometimes it'll spike to be ridiculous
numbers.
It will.
It does spike
but not for very long periods of time.
So the bottom line is it's not.
That's a big chunk.
That's a substantial chunk of it,
but not even close to a majority of it.
So you know people default
but they don't default that much.</p>
</details>

Tracy Alloway (TA):
Can I ask one more question on APR and the average there, did you observe any trend over time, like did the rate actually get higher, you know, as, as time went on.

ID:
So that's something we haven't spent
a lot of time on in this paper.
But the answer your question is
this is obviously yes.
So if you look at it, I think
what can be found online is again, it's
there's a bit of a
I think there's something
a little misleading there,
but that has trended up pretty strongly.
I think not as much as somebody,
you know, goes their computer and looks up
and I'll say, Fred,
you know, from the from the call reports,
what is the average APR.
It looks crazy.
It looks like it's gone up 10%.
It's gone up.
We're going to get to the bottom
of like exactly how much
I think it's gone up substantially
since ten years ago, let's say,
that that trend is clear.
I don't think it's
as much as it looks like there,
but yeah, it's been going up actually.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Can I ask one more question on APR and the average there, did you observe any trend over time, like did the rate actually get higher, you know, as, as time went on.
So that's something we haven't spent
a lot of time on in this paper.
But the answer your question is
this is obviously yes.
So if you look at it, I think
what can be found online is again, it's
there's a bit of a
I think there's something
a little misleading there,
but that has trended up pretty strongly.
I think not as much as somebody,
you know, goes their computer and looks up
and I'll say, Fred,
you know, from the from the call reports,
what is the average APR.
It looks crazy.
It looks like it's gone up 10%.
It's gone up.
We're going to get to the bottom
of like exactly how much
I think it's gone up substantially
since ten years ago, let's say,
that that trend is clear.
I don't think it's
as much as it looks like there,
but yeah, it's been going up actually.</p>
</details>

ID:
Okay.
So you've established
default rates for credit cards.
And as you said, like this is
this business is about volume, right?
So is there an argument to be made
that maybe
if the world, you know, falls apart,
then you have lots and lots
and lots of consumers
who are defaulting, but, you know,
potentially at a low rate of the total.
But the volume makes it meaningful
for banks.
I mean, we are already looking at
as a percentage of, of assets.
So, that kind of like value weights,
it takes it all into consideration.
I think the question like in
our minds was at first,
you know, maybe in a crisis,
something extreme happens.
In a sense it does.
But this is already
the average default rate.
So usually it's lower.
And then you kind
of include this in there. So
we'll talk
I guess a little bit about risk premium.
Yeah.
It turns out to be very clear here
and important.
But it's not in it's, you know, just
the average default rate is what it is.
So it's not in expected defaults.
Again, they're it's surprising.
At the same time, if you just look
at where banks actually suffered
default losses in, in an average year,
not a crisis year,
something like 50% of banks default losses
are actually coming from credit cards.
The thing is,
is that they're not surprising.
They're not unexpected, losses.
They're kind of the expected,
but it's still really big.
And the reason for that
is, even though credit cards only
take up about 5% of banks balance sheet,
the charge offs or the defaults
on average, bank assets is very low.
I mean, and we have this impression
of banks as being these like,
you know, crazy like,
you know, risk taking lunatic.
You're actually,
I think, the right way to look at them
is that their average asset
is extremely boring and low risk.
They do take a lot of leverage,
which is only possible
because the average asset
is extremely boring and low risk.
But even after all that, it's not.
The amount of default
is not really that high.
So if your average asset has about 40
basis points, average charge offs,
and this thing has over 5%, then
even if it's only 5% of the balance sheet,
it it can act like it's
50% of the charge off.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Okay.
So you've established
default rates for credit cards.
And as you said, like this is
this business is about volume, right?
So is there an argument to be made
that maybe
if the world, you know, falls apart,
then you have lots and lots
and lots of consumers
who are defaulting, but, you know,
potentially at a low rate of the total.
But the volume makes it meaningful
for banks.
I mean, we are already looking at
as a percentage of, of assets.
So, that kind of like value weights,
it takes it all into consideration.
I think the question like in
our minds was at first,
you know, maybe in a crisis,
something extreme happens.
In a sense it does.
But this is already
the average default rate.
So usually it's lower.
And then you kind
of include this in there. So
we'll talk
I guess a little bit about risk premium.
Yeah.
It turns out to be very clear here
and important.
But it's not in it's, you know, just
the average default rate is what it is.
So it's not in expected defaults.
Again, they're it's surprising.
At the same time, if you just look
at where banks actually suffered
default losses in, in an average year,
not a crisis year,
something like 50% of banks default losses
are actually coming from credit cards.
The thing is,
is that they're not surprising.
They're not unexpected, losses.
They're kind of the expected,
but it's still really big.
And the reason for that
is, even though credit cards only
take up about 5% of banks balance sheet,
the charge offs or the defaults
on average, bank assets is very low.
I mean, and we have this impression
of banks as being these like,
you know, crazy like,
you know, risk taking lunatic.
You're actually,
I think, the right way to look at them
is that their average asset
is extremely boring and low risk.
They do take a lot of leverage,
which is only possible
because the average asset
is extremely boring and low risk.
But even after all that, it's not.
The amount of default
is not really that high.
So if your average asset has about 40
basis points, average charge offs,
and this thing has over 5%, then
even if it's only 5% of the balance sheet,
it it can act like it's
50% of the charge off.</p>
</details>

ID:
I also like other forms of consumer
borrowing.
Right.
Like people are very assiduous
about making their car payments. Yes.
I'm making I don't know.
Well up until recently, up until recently.
But historically, the perception was
people really prioritized car payments.
Right.
Because you that's essential to live
and you can't have your car repossessed.
Home mortgages
obviously, for obvious reason,
I imagine that a stretched household
will miss
credit card payments are more inclined to
if they're going to have to miss
a payment, it's going to be there versus
some of these other popular
areas of borrowing aren't totally so.
The other ones are secured
and this is unsecured.
So, you know, that's in that sense,
this this is an actual asset that's,
kind of risky and interesting from,
from my vantage point in that it's
unsecured lending to,
normal people, all the rest of the stuff
is secured, like, like mortgages.
You know, home homes are obviously very
important collateral cars, pretty much.
So the rates on
those are much, much lower in these.
There's nowhere near,
you know, the spread.
There's nowhere near as juicy.
I mean, when I teach students,
we go through or like,
you know, the hierarchy of borrowing the,
the vast majority of borrowing is secured.
You have to think it's crazy for a bank
to come to somebody with a medium or lower
credit score and say, here,
have a line of credit of like five,
$10,000, you know, and it's not you
and you can default on it.
You don't get shot for that. It's, it's
part of the law.
It's part of the game. Yeah.
I was reading
a, an article from life in 1970
where they were talking about
how credit cards are becoming a big thing,
and, oh, my God, these credit card
companies are just mailing out
applications to Americans.
It's like giving sugar to diabetics.
That was their analogy.
Speaking of unsecured versus secured,
I am also looking right now at,
a website that claims to have invented
the first credit card
that's based on your stock portfolio.
So borrowing against your stock
with a card.
I gotta say,
the card does look pretty nice.
It's made of glass.
Maybe that tells you something
like what was I.
An unintentional metaphor. Yeah, exactly.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">I also like other forms of consumer
borrowing.
Right.
Like people are very assiduous
about making their car payments. Yes.
I'm making I don't know.
Well up until recently, up until recently.
But historically, the perception was
people really prioritized car payments.
Right.
Because you that's essential to live
and you can't have your car repossessed.
Home mortgages
obviously, for obvious reason,
I imagine that a stretched household
will miss
credit card payments are more inclined to
if they're going to have to miss
a payment, it's going to be there versus
some of these other popular
areas of borrowing aren't totally so.
The other ones are secured
and this is unsecured.
So, you know, that's in that sense,
this this is an actual asset that's,
kind of risky and interesting from,
from my vantage point in that it's
unsecured lending to,
normal people, all the rest of the stuff
is secured, like, like mortgages.
You know, home homes are obviously very
important collateral cars, pretty much.
So the rates on
those are much, much lower in these.
There's nowhere near,
you know, the spread.
There's nowhere near as juicy.
I mean, when I teach students,
we go through or like,
you know, the hierarchy of borrowing the,
the vast majority of borrowing is secured.
You have to think it's crazy for a bank
to come to somebody with a medium or lower
credit score and say, here,
have a line of credit of like five,
$10,000, you know, and it's not you
and you can default on it.
You don't get shot for that. It's, it's
part of the law.
It's part of the game. Yeah.
I was reading
a, an article from life in 1970
where they were talking about
how credit cards are becoming a big thing,
and, oh, my God, these credit card
companies are just mailing out
applications to Americans.
It's like giving sugar to diabetics.
That was their analogy.
Speaking of unsecured versus secured,
I am also looking right now at,
a website that claims to have invented
the first credit card
that's based on your stock portfolio.
So borrowing against your stock
with a card.
I gotta say,
the card does look pretty nice.
It's made of glass.
Maybe that tells you something
like what was I.
An unintentional metaphor. Yeah, exactly.</p>
</details>

### 风险溢价与奖励机制的权衡

TA:
Okay, so if it's not about risk premiums,
if the rate isn't compensating
for something like default,
could it be comp and sating
for all the points and benefits
that customers are accruing at once?
So it's not just compensation
for expected default.

ID:
I want I want to separate
that from the risk premium.
The risk premium is kind of
the competition for unexpected default,
which turns out to be pretty big here.
But let's go back and talk about,
the points and stuff.
So I find that people care
more about people who are more excited
to talk about points than anything.
The term rewards was really a marketing
flourish.
So, yeah.
So in total number of dollars,
this interchange was I mean, again,
you have to look at, find exact numbers,
but for credit cards alone,
I think it was over $150 billion.
So like the GDP of a medium sized country
gets transferred as, as interchange,
maybe small country.
And we find that about 85% of that
gets transferred through as rewards.
You could wonder.
I think it'd be natural to say,
what is the point of this?
Why why charge people?
You know,
1.8% and then pass through 1.57%
as rewards, where, well,
at least some people, like I guess
you and I don't pay that much attention.
I think I have enormous amounts
of United miles I'm never going to use,
because I have to actually travel
to whatever place to use them.
So, why is that?
I mean, I think a good economic question
if people have tackled this,
I do think it creates
a very strong network effect.
So you are not actually seeing a charge
for this.
It's the retailer that has to eat it.
And if you do not, use a card that gives
rewards, you're not going to get, in
most cases a lower price.
So there's a whole series of litigation
and fights over the years, amazing
about what retailers
can do to discriminate.
You know,
price is based people who use cards.
And, and I thought a couple years ago,
over the last couple of years, I'm
seeing more restaurants
give you back a percentage
or not charge you a percentage.
If you didn't do that.
But it's it's a little bit
beyond my legal expertise to sometimes
understand this, because for the longest
time, I can't remember which.
I think you could give people a discount,
but you couldn't do a surcharge.
There was some, like, legal discrimination
between those things.
And as a result, people mostly
don't pay attention to that kind of thing.
And so you you really want
to stay inside the network?
And it kind of keeps you there,
even if at the end
it would be a total pass through, it still
helps for them to keep this business.
You know, it's interesting.
There's this crypto company.
Have you heard of Blackbird?
Yeah, it's a crypto thing.
And they have a bunch of restaurants.
You sign up
and you're like, paying a coin.
I don't know exactly how it works,
but I think that
they have to own some way
because in theory would be nice.
Like, maybe we'll get a little bit
in the stablecoin.
There's like a payment rule in the future
or in this conversation
and think it'll be a nice way
to circumvent this.
But even they, I think, implicitly have to
reinvent the rewards model to do it.
Maybe you get premium
seed, you get reservations, etc..
in order to sort of like bootstrap
a new network, you start end up
having to reinvent a lot of the rebates
and the benefits and so etc.
that come with the old network.
Maybe we'll get into crypto
a little bit more,
but talk to us a little bit more
than about like the persist ins of this,
of the spread that can't even that
can't fully be explained by default.
Yeah.
So so the default,
like I said, is like a little under 6%.
Yeah. Then I'll just I'll mention it.
So these things do tend to default
do spike in bad times.
So we estimate using kind of the cross
section of different Fico scores.
How much extra compensation you get
as you go to lower and lower
Fico scores in terms of extra APR,
net of the defaults.
So we estimate that the risk premium
there is accounting for about
similar sized piece. So
there's
a risk premium about 5% on average,
which is much smaller for let's say
you're an 800 and like go borrower.
There's not that much risk premium.
But if you're a 600 Fico borrower,
the risk premium goes up to like,
you know, 9%.
So we go back to like what that mean.
I think it's means something
very important.
I think the person who's borrowing
there may not realize that they are paying
a very large risk being
so if you're, low co-borrower
and you aren't going to default, like,
you know, you're not,
you're paying a very high risk premium.
And that is because other people
default in bad times.
And so you're and even if you do think
you're going to default, sometimes I think
one should realize how much of a risk
premium you're actually paying for this.
So but now let's go back to something else
before, before we,
maybe talk more about that is,
the other pieces of this.
So we talked about interchange and rewards
largely cancel out leaves a little bit.
It's not zero.
They do on a little bit from it.
Most of the transact there's what
they make off transact is that difference.
Because transact or spend
you know recurring a lot borrowers
tend to kind of accumulate and they don't
have that much more room to spend
because they've borrowed.
So that's not a big portion
of the of the revenues there.
Then there's fees.
That's another couple percent
is actually making the puzzle worse.
And then the part that turned out
to be really big, that surprised us
is operating expenses.
Of which marketing you mentioned.
This turns out to be really big.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">I want I want to separate
that from the risk premium.
The risk premium is kind of
the competition for unexpected default,
which turns out to be pretty big here.
But let's go back and talk about,
the points and stuff.
So I find that people care
more about people who are more excited
to talk about points than anything.
The term rewards was really a marketing
flourish.
So, yeah.
So in total number of dollars,
this interchange was I mean, again,
you have to look at, find exact numbers,
but for credit cards alone,
I think it was over $150 billion.
So like the GDP of a medium sized country
gets transferred as, as interchange,
maybe small country.
And we find that about 85% of that
gets transferred through as rewards.
You could wonder.
I think it'd be natural to say,
what is the point of this?
Why why charge people?
You know,
1.8% and then pass through 1.57%
as rewards, where, well,
at least some people, like I guess
you and I don't pay that much attention.
I think I have enormous amounts
of United miles I'm never going to use,
because I have to actually travel
to whatever place to use them.
So, why is that?
I mean, I think a good economic question
if people have tackled this,
I do think it creates
a very strong network effect.
So you are not actually seeing a charge
for this.
It's the retailer that has to eat it.
And if you do not, use a card that gives
rewards, you're not going to get, in
most cases a lower price.
So there's a whole series of litigation
and fights over the years, amazing
about what retailers
can do to discriminate.
You know,
price is based people who use cards.
And, and I thought a couple years ago,
over the last couple of years, I'm
seeing more restaurants
give you back a percentage
or not charge you a percentage.
If you didn't do that.
But it's it's a little bit
beyond my legal expertise to sometimes
understand this, because for the longest
time, I can't remember which.
I think you could give people a discount,
but you couldn't do a surcharge.
There was some, like, legal discrimination
between those things.
And as a result, people mostly
don't pay attention to that kind of thing.
And so you you really want
to stay inside the network?
And it kind of keeps you there,
even if at the end
it would be a total pass through, it still
helps for them to keep this business.
You know, it's interesting.
There's this crypto company.
Have you heard of Blackbird?
Yeah, it's a crypto thing.
And they have a bunch of restaurants.
You sign up
and you're like, paying a coin.
I don't know exactly how it works,
but I think that
they have to own some way
because in theory would be nice.
Like, maybe we'll get a little bit
in the stablecoin.
There's like a payment rule in the future
or in this conversation
and think it'll be a nice way
to circumvent this.
But even they, I think, implicitly have to
reinvent the rewards model to do it.
Maybe you get premium
seed, you get reservations, etc..
in order to sort of like bootstrap
a new network, you start end up
having to reinvent a lot of the rebates
and the benefits and so etc.
that come with the old network.
Maybe we'll get into crypto
a little bit more,
but talk to us a little bit more
than about like the persist ins of this,
of the spread that can't even that
can't fully be explained by default.
Yeah.
So so the default,
like I said, is like a little under 6%.
Yeah. Then I'll just I'll mention it.
So these things do tend to default
do spike in bad times.
So we estimate using kind of the cross
section of different Fico scores.
How much extra compensation you get
as you go to lower and lower
Fico scores in terms of extra APR,
net of the defaults.
So we estimate that the risk premium
there is accounting for about
similar sized piece. So
there's
a risk premium about 5% on average,
which is much smaller for let's say
you're an 800 and like go borrower.
There's not that much risk premium.
But if you're a 600 Fico borrower,
the risk premium goes up to like,
you know, 9%.
So we go back to like what that mean.
I think it's means something
very important.
I think the person who's borrowing
there may not realize that they are paying
a very large risk being
so if you're, low co-borrower
and you aren't going to default, like,
you know, you're not,
you're paying a very high risk premium.
And that is because other people
default in bad times.
And so you're and even if you do think
you're going to default, sometimes I think
one should realize how much of a risk
premium you're actually paying for this.
So but now let's go back to something else
before, before we,
maybe talk more about that is,
the other pieces of this.
So we talked about interchange and rewards
largely cancel out leaves a little bit.
It's not zero.
They do on a little bit from it.
Most of the transact there's what
they make off transact is that difference.
Because transact or spend
you know recurring a lot borrowers
tend to kind of accumulate and they don't
have that much more room to spend
because they've borrowed.
So that's not a big portion
of the of the revenues there.
Then there's fees.
That's another couple percent
is actually making the puzzle worse.
And then the part that turned out
to be really big, that surprised us
is operating expenses.
Of which marketing you mentioned.
This turns out to be really big.</p>
</details>

### 营销开支与消费者对价格的不敏感性

ID:
And this is yeah.
This is the thing that I don't get.
There is so much marketing
for credit cards.
And as I said, like
they're all kind of similar in many ways.
And I remember
this was often the, like the blockage
for new entrants from the fintech space
trying to get into this business.
I remember talking to Lending Club
about this back when they were a thing,
and they were spending so much money
on mail advertisements,
and I just don't get why
that's the primary acquisition channel
and why it seems to be so important
to the business model.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">And this is yeah.
This is the thing that I don't get.
There is so much marketing
for credit cards.
And as I said, like
they're all kind of similar in many ways.
And I remember
this was often the, like the blockage
for new entrants from the fintech space
trying to get into this business.
I remember talking to Lending Club
about this back when they were a thing,
and they were spending so much money
on mail advertisements,
and I just don't get why
that's the primary acquisition channel
and why it seems to be so important
to the business model.</p>
</details>

TA:
Okay,
so I think you hit on like the really,
it's a really interesting question.
Maybe the answer would be
like people listening, this will be like,
you know, I knew that, but maybe they did.
So which is the reason you do it
because it works,
which means which by which
I mean you could.
This goes back to Joe's question.
I think you can see we look we do this
analysis there that if you spend more
on operating expenses, which I think
largely means additional marketing,
because the actual operational side of
this apparently is very expensive.
But there's big differences
across these guys in operating expenses.
And I don't think it's because
there's systems that are like much more,
and we actually see no relation
between that and the.
So once you control for Fico.
So it's not about screening people
for better borrowers.
But what it is, it's very it's
an effective apparently at the margin,
acquisition
strategy, customer acquisition strategy.
So you could do to think
the following thought process.
You could say, well, why don't somebody
just cut all this marketing out
and just charge a lower rate
and that'll get people.
Yeah, that's
that's your acquisition advertising.
Right.
But there's a. Literally it doesn't work.
So so people are
not are not rate sensitive,
which is a recurring theme
I'm starting to get in, you know, learn
when we talk about we talked about banks
and bank deposit rates.
People are
they're not completely insensitive
obviously, but they're not that sensitive
to the rates.
They get paid and they're not that
sensitive to the rates.
They get charged on this.
So there are actually this is surprising
saying the Cfpb has a spreadsheet.
Well, when there are people still working
there, they used to have a spreadsheet.
That they updated with essentially
every single card there is
and what the rate on it
and all the cheapest cards
are credit unions
and they're significantly cheaper, much
cheaper than your average credit card.
But I'm sure almost nobody except
their customers have heard about them.
And it's
because they don't advertise much.
And so you say, well,
if their rates are so cheap and people
go there,
it's like they haven't heard about them
and they don't care that much about
the rate is my inference from this.
So the more you pay for marketing
and operating expenses in the data,
the higher is the average amount
you're able to charge it.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Okay,
so I think you hit on like the really,
it's a really interesting question.
Maybe the answer would be
like people listening, this will be like,
you know, I knew that, but maybe they did.
So which is the reason you do it
because it works,
which means which by which
I mean you could.
This goes back to Joe's question.
I think you can see we look we do this
analysis there that if you spend more
on operating expenses, which I think
largely means additional marketing,
because the actual operational side of
this apparently is very expensive.
But there's big differences
across these guys in operating expenses.
And I don't think it's because
there's systems that are like much more,
and we actually see no relation
between that and the.
So once you control for Fico.
So it's not about screening people
for better borrowers.
But what it is, it's very it's
an effective apparently at the margin,
acquisition
strategy, customer acquisition strategy.
So you could do to think
the following thought process.
You could say, well, why don't somebody
just cut all this marketing out
and just charge a lower rate
and that'll get people.
Yeah, that's
that's your acquisition advertising.
Right.
But there's a. Literally it doesn't work.
So so people are
not are not rate sensitive,
which is a recurring theme
I'm starting to get in, you know, learn
when we talk about we talked about banks
and bank deposit rates.
People are
they're not completely insensitive
obviously, but they're not that sensitive
to the rates.
They get paid and they're not that
sensitive to the rates.
They get charged on this.
So there are actually this is surprising
saying the Cfpb has a spreadsheet.
Well, when there are people still working
there, they used to have a spreadsheet.
That they updated with essentially
every single card there is
and what the rate on it
and all the cheapest cards
are credit unions
and they're significantly cheaper, much
cheaper than your average credit card.
But I'm sure almost nobody except
their customers have heard about them.
And it's
because they don't advertise much.
And so you say, well,
if their rates are so cheap and people
go there,
it's like they haven't heard about them
and they don't care that much about
the rate is my inference from this.
So the more you pay for marketing
and operating expenses in the data,
the higher is the average amount
you're able to charge it.</p>
</details>

ID:
It's really funny,
this some of the stuff rappelle
the brain of the academic economist
now for real,
like this idea that the borrower
wouldn't be rate sensitive.
The idea that we're actually paying more
to be advertised to, etc..
because this is their cost, the idea that
there are lower cost options out there
and all we have to do is search for them
and they're available like.
Well,
also for macro economists specifically.
Right.
Because we talk about benchmark rates
and the importance
of how those feed into the economy.
And here we are
talking about the credit card rate,
which is actually potentially more.
Like I'm serious though, like
do you encounter academics in this space?
You think this cannot
the idea
rates are high
because to some extent consumers just
aren't paying attention to them, etc..
Do you encounter people
who think there must be something,
there must be some variable you're missing
because we're rational
and we would seek out the lower rate.
I want to talk to people
like you're saying.
I haven't really had a chance because.
Because we tend,
you know, when you pitch this
to a finance audience, not macro people.
And I'm a finance person,
then they're more open it.
I mean, credit cards are the thing in
finance people. People like credit cards.
But I think the interaction with macro
and monetary is really interesting.
So it doesn't it doesn't bother me.
I think it's interesting.
I mean, I think it's kind of bad
that a lot of people who are usually not
in the best shape are essentially adding
6% rate to their credit card
because they're paying for the advertising
that they responded to.
But, you know, that's, you know,
you could get it if you didn't respond
to the advertising, responded to the rate,
they would do that instead.
But but they don't.
So, but you know, think about, you know,
you guys often talk about the
fed lowering or hiking rates,
at at
the risk of sounding, heretical here,
I am not a huge believer
that consumers at all are very sensitive
to these changes in the in the policy rate
and the fed funds rate,
even though the standard model works
through their intertemporal consumption
savings decision, I think the evidence
is very weak that they care about that.
And then the credit card,
I think on top of
that is really makes this clear,
because if you're paying 23%
and you are the kind of person
that wants to, to borrow,
I mean, obviously because you've borrowed,
how much is a half a percent
going to matter to you if the fed hikes?
Plus you could have been getting
a much cheaper rate anyway.
And that didn't compel
you to go looking for it.
So I think I think it kind of puts,
you know,
a big question mark over
whether that's really the channel which
and which is a lot of people
have said that, but it's still kind of
the main way we talk about those things.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">It's really funny,
this some of the stuff rappelle
the brain of the academic economist
now for real,
like this idea that the borrower
wouldn't be rate sensitive.
The idea that we're actually paying more
to be advertised to, etc..
because this is their cost, the idea that
there are lower cost options out there
and all we have to do is search for them
and they're available like.
Well,
also for macro economists specifically.
Right.
Because we talk about benchmark rates
and the importance
of how those feed into the economy.
And here we are
talking about the credit card rate,
which is actually potentially more.
Like I'm serious though, like
do you encounter academics in this space?
You think this cannot
the idea
rates are high
because to some extent consumers just
aren't paying attention to them, etc..
Do you encounter people
who think there must be something,
there must be some variable you're missing
because we're rational
and we would seek out the lower rate.
I want to talk to people
like you're saying.
I haven't really had a chance because.
Because we tend,
you know, when you pitch this
to a finance audience, not macro people.
And I'm a finance person,
then they're more open it.
I mean, credit cards are the thing in
finance people. People like credit cards.
But I think the interaction with macro
and monetary is really interesting.
So it doesn't it doesn't bother me.
I think it's interesting.
I mean, I think it's kind of bad
that a lot of people who are usually not
in the best shape are essentially adding
6% rate to their credit card
because they're paying for the advertising
that they responded to.
But, you know, that's, you know,
you could get it if you didn't respond
to the advertising, responded to the rate,
they would do that instead.
But but they don't.
So, but you know, think about, you know,
you guys often talk about the
fed lowering or hiking rates,
at at
the risk of sounding, heretical here,
I am not a huge believer
that consumers at all are very sensitive
to these changes in the in the policy rate
and the fed funds rate,
even though the standard model works
through their intertemporal consumption
savings decision, I think the evidence
is very weak that they care about that.
And then the credit card,
I think on top of
that is really makes this clear,
because if you're paying 23%
and you are the kind of person
that wants to, to borrow,
I mean, obviously because you've borrowed,
how much is a half a percent
going to matter to you if the fed hikes?
Plus you could have been getting
a much cheaper rate anyway.
And that didn't compel
you to go looking for it.</p>
</details>

### 个人信用贷款：被忽视的低成本替代方案

TA:
Can you talk a little
bit more about competition?
And again, like,
why doesn't someone just come in
with a lower rate
and disrupt the entire business?
But it is, I think.
Let's give you another example.
If you personal lines of credit,
these were all new things to me.
I find this,
I think, where you've put retail people
with the financial sector,
you actually get a lot of explosions,
just like weird stuff.
So that's the place
where sort of academics should go
looking, and many do, but
it's not the place where I kind of having
worked at like hedge fund market maker.
Ever thought about these things
you don't think about,
like the fancy people,
like the people who are sophisticated
do all the math.
But that's not
they kind of cancel each other out
where the real fireworks are
is when you get into the retail sector.
And if you look at personal lines
of credit
from the same companies, at the same Fico,
they're substantially cheaper.
Plus you get all the money up front
that there's something
I it's still very puzzling
that there is almost no marketing there.
You don't get marketed
a lot on personal lines of credit,
and the people who discover them
do use them to consolidate these debts
and pay them off in one shot at a lower
interest rate.
It's a very, I think, very logical thing,
to do the people don't do.
But I mean, just to get back to
I think we see them over and over
and you're talking about BNP stuff,
this idea of how do you acquire customers
and what role the rate actually has
there is and just keep, keep seeing.
It's like a movie. I've seen this before.
It's more effective at the margin than
lowering the rates, and it explains a lot.
I think, of how the finance
sector interacts with retail,
which is not just like canceling out.
So that's the issue.
It's like, oh, well,
they spend 5% of assets on marketing.
Then they add 5% to the cost.
I guess there's no harm in that.
Well, not really,
because what people have done is paid
the 5% in order to get the marketing.
So if you really like the commercials,
you should be really happy.
But I don't think
most people would sign up for that.
I'm just I'm still stunned
that the advertising actually works
because like, I get the mail and
I just throw it out without looking at it.
Maybe I should be looking at it.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Can you talk a little
bit more about competition?
And again, like,
why doesn't someone just come in
with a lower rate
and disrupt the entire business?
But it is, I think.
Let's give you another example.
If you personal lines of credit,
these were all new things to me.
I find this,
I think, where you've put retail people
with the financial sector,
you actually get a lot of explosions,
just like weird stuff.
So that's the place
where sort of academics should go
looking, and many do, but
it's not the place where I kind of having
worked at like hedge fund market maker.
Ever thought about these things
you don't think about,
like the fancy people,
like the people who are sophisticated
do all the math.
But that's not
they kind of cancel each other out
where the real fireworks are
is when you get into the retail sector.
And if you look at personal lines
of credit
from the same companies, at the same Fico,
they're substantially cheaper.
Plus you get all the money up front
that there's something
I it's still very puzzling
that there is almost no marketing there.
You don't get marketed
a lot on personal lines of credit,
and the people who discover them
do use them to consolidate these debts
and pay them off in one shot at a lower
interest rate.
It's a very, I think, very logical thing,
to do the people don't do.
But I mean, just to get back to
I think we see them over and over
and you're talking about BNP stuff,
this idea of how do you acquire customers
and what role the rate actually has
there is and just keep, keep seeing.
It's like a movie. I've seen this before.
It's more effective at the margin than
lowering the rates, and it explains a lot.
I think, of how the finance
sector interacts with retail,
which is not just like canceling out.
So that's the issue.
It's like, oh, well,
they spend 5% of assets on marketing.
Then they add 5% to the cost.
I guess there's no harm in that.
Well, not really,
because what people have done is paid
the 5% in order to get the marketing.
So if you really like the commercials,
you should be really happy.
But I don't think
most people would sign up for that.
I'm just I'm still stunned
that the advertising actually works
because like, I get the mail and
I just throw it out without looking at it.
Maybe I should be looking at it.</p>
</details>

ID:
On the disruption
front, you mentioned Bnpl
and we've done at least one episode on it.
We should probably do more at some point.
Is that the big disruptor?
You know, if they're plugged into websites
and some of them are getting rewarded
for being plugged
into those websites by retailers,
then they bypass
the high acquisition costs
and presumably can still acquire customers
because you see them everywhere online.
So I do think that has, a lot to do
with what
their angle is, is, is
it gets in in front of you, in that way,
and listen to a recent episode of yours,
I think you guys were talking about
being sued.
I wasn't going back in to a much earlier
episode, but,
I don't think the economics of the Bnpl,
beyond that aspect of it
are that different from the credit cards.
Right.
And there's still is very high
operating and acquisition cost.
If you look at like Bnpl companies versus
most of them don't really make money.
And so I think they're still in that stage
where they're building up to it.
And you mentioned Lending Club
didn't make money. No.
No, it did not.
It didn't.
So because I think you want to grab
these juicy customers, but they, they're
your response to the marketing.
So and just to go even back to that.
So Amex is one of it's really hard
to find aggregate marketing numbers
across companies.
But from lists
I've seen, Amex might even be it's
definitely, I think, a top ten marketer
in the whole country.
It might even be in top five,
I'm not sure.
Along with some of the that spends over
$6 billion a year on marketing.
And this is not including the lounges
and all this,
which there's been like articles
about how everybody's like investing
like millions of dollars in these
like that's that's a separate category
and Capital One spends over $4 billion a year.
So I looked it up.
And Amex is bigger than Nike
and Coke and marketing.
And you think of like those are being
the ones that are
got to be like the gigantic ones.
And Capital One's about as big.
A personal line of credit. Yeah.
This is a good classic.
What is that product?
I've never looked into one of those.
I haven't had an unsecured loan
from a bank.
It's an unsecured loan.
But this is just like classic bank
borrowing.
I go to the bank, goes, hey,
can I borrow some money?
Surprisingly, the.
I mean, you can you can.
Look it up even like like it's
so easy to do it, to look it up.
They offer it's a relatively large amount
compared to a credit card.
Yeah.
And you put in your if I go
they give you a rate.
The rates almost for sure
always lower than than the credit card.
I don't get it either.
But you know I, I, you know.
One could use these to pay off.
And that's mostly what people do,
which they should.
I had a journalist
ask me about this and I was like,
this is a great idea.
Like,
I should look this up and talk about this.
I mean, there's no, you know,
how do you explain the spread?
I mean, I think largely
it is a it's it's got a lot of this,
less of this retail focus to it.
But yeah, it's the same companies too.
If you go to Amex,
you can Amex line of credit.
Discover offers a discover
line of credit Capital One
to Capital One line of credit.
It's the same thing. It's so strange.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">On the disruption
front, you mentioned Bnpl
and we've done at least one episode on it.
We should probably do more at some point.
Is that the big disruptor?
You know, if they're plugged into websites
and some of them are getting rewarded
for being plugged
into those websites by retailers,
then they bypass
the high acquisition costs
and presumably can still acquire customers
because you see them everywhere online.
So I do think that has, a lot to do
with what
their angle is, is, is
it gets in in front of you, in that way,
and listen to a recent episode of yours,
I think you guys were talking about
being sued.
I wasn't going back in to a much earlier
episode, but,
I don't think the economics of the Bnpl,
beyond that aspect of it
are that different from the credit cards.
Right.
And there's still is very high
operating and acquisition cost.
If you look at like Bnpl companies versus
most of them don't really make money.
And so I think they're still in that stage
where they're building up to it.
And you mentioned Lending Club
didn't make money. No.
No, it did not.
It didn't.
So because I think you want to grab
these juicy customers, but they, they're
your response to the marketing.
So and just to go even back to that.
So Amex is one of it's really hard
to find aggregate marketing numbers
across companies.
But from lists
I've seen, Amex might even be it's
definitely, I think, a top ten marketer
in the whole country.
It might even be in top five,
I'm not sure.
Along with some of the that spends over
$6 billion a year on marketing.
And this is not including the lounges
and all this,
which there's been like articles
about how everybody's like investing
like millions of dollars in these
like that's that's a separate category
and Capital One spends over $4 billion a year.
So I looked it up.
And Amex is bigger than Nike
and Coke and marketing.
And you think of like those are being
the ones that are
got to be like the gigantic ones.
And Capital One's about as big.
A personal line of credit. Yeah.
This is a good classic.
What is that product?
I've never looked into one of those.
I haven't had an unsecured loan
from a bank.
It's an unsecured loan.
But this is just like classic bank
borrowing.
I go to the bank, goes, hey,
can I borrow some money?
Surprisingly, the.
I mean, you can you can.
Look it up even like like it's
so easy to do it, to look it up.
They offer it's a relatively large amount
compared to a credit card.
Yeah.
And you put in your if I go
they give you a rate.
The rates almost for sure
always lower than than the credit card.
I don't get it either.
But you know I, I, you know.
One could use these to pay off.
And that's mostly what people do,
which they should.
I had a journalist
ask me about this and I was like,
this is a great idea.
Like,
I should look this up and talk about this.
I mean, there's no, you know,
how do you explain the spread?
I mean, I think largely
it is a it's it's got a lot of this,
less of this retail focus to it.
But yeah, it's the same companies too.
If you go to Amex,
you can Amex line of credit.
Discover offers a discover
line of credit Capital One
to Capital One line of credit.
It's the same thing. It's so strange.</p>
</details>

ID:
This whole conversation in edges into some
frankly like slightly uncomfortable
territory, in my opinion.
Because you. Right.
Because especially when you characterize
something, it's like you're
kind of end up paying a lot for them
to advertise to you when you apparently
like the advertised advertisement
because that's you responded to it, etc..
Like you add you to this territory
where it's like,
these are not like it must be, though,
not the most sophisticated base.
Right? Like it's sort of
I again, I don't want it.
It's like the it's like, why do Nigerian
email scams have all kinds of typos, etc.?
And the theory is
because they want to select for people
who will be foolish enough to respond
to them, because if you go down the chain,
they don't want you to be too savvy
in asking questions.
So like,
let's just get all the savvy customers
out of the way
who would instantly recognize a scam email
and then you, like, get there, right?
Like.
Are you saying that the Nigerian
princes don't pay you?
I'm just saying.
I'm like being.
Like,
it seems like there's a filtration process
going on where you end up with this,
the base of revolvers
where all this money is made, where it is
clearly not that financially secure,
because otherwise
they would be doing the person
line of credit or not doing these things
or looking for that, looking for the
credit union credit card.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">This whole conversation in edges into some
frankly like slightly uncomfortable
territory, in my opinion.
Because you. Right.
Because especially when you characterize
something, it's like you're
kind of end up paying a lot for them
to advertise to you when you apparently
like the advertised advertisement
because that's you responded to it, etc..
Like you add you to this territory
where it's like,
these are not like it must be, though,
not the most sophisticated base.
Right? Like it's sort of
I again, I don't want it.
It's like the it's like, why do Nigerian
email scams have all kinds of typos, etc.?
And the theory is
because they want to select for people
who will be foolish enough to respond
to them, because if you go down the chain,
they don't want you to be too savvy
in asking questions.
So like,
let's just get all the savvy customers
out of the way
who would instantly recognize a scam email
and then you, like, get there, right?
Like.
Are you saying that the Nigerian
princes don't pay you?
I'm just saying.
I'm like being.
Like,
it seems like there's a filtration process
going on where you end up with this,
the base of revolvers
where all this money is made, where it is
clearly not that financially secure,
because otherwise
they would be doing the person
line of credit or not doing these things
or looking for that, looking for the
credit union credit card.</p>
</details>

ID:
Well, I'll say something about marketing.
I mean, we all do respect that.
You know, you guys are
you guys are very not elitist.
Here went every anti elitist.
So, marketing is a just a huge industry.
And as a finance person I was like,
we do have a marketing department at
the business school.
And I'm like, oh, there's a reason.
Because you look at let's say
you look at alphabet and meta.
Yeah.
Meta revenues are almost 100% from
I think there's like you had a guest
also talking about this kind of thing.
So, almost 100% from marketing. Yeah.
Who goes are like it close to 80%.
We're talking about
hundreds of billions of dollars a year
and all the very sophisticated stuff.
And at the end, it's.
So, you know, it works. It works.
And I've certainly been taking it.
I get taken in by marketing all the time.
And let's just say one of the say,
one of the thing is, I think the reason
that because the, the ROI is
here are high, though
when we decompose this at the end,
it sort of does most.
If you take the alpha of this,
think of this as alpha
relative to the average bank asset,
we get that it's about a percent.
So how do you get down to a percent.
So the risk premium here is quite big.
We compare it to the risk
premium on bonds.
You have to compare it
to high yield corporate bonds.
And it looks similar for all.
But the lowest Fico bonds versus let's say
triple C rated bonds, where the lowest
Fico seems to have a big chunk or the risk
premium over and above the bonds.
I could actually see the bonds
look a little low
relative to that, because it's the risk
being on credit cards.
It kind of rises linearly,
and it's the bonds that kind of don't.
But for the not so bad credit, it's
pretty similar risk premium to high yield
bond markets.
And that sense doesn't look it's big
but it doesn't look crazy.
But I should say, you know Goldman
I think they when they got it
before they got into credit cards
and it did not work out.
So apparently it is competitive
in that sense.
I think they were eyeing this and saying,
this is this is a good business.
You see, the highest
ROI is by far of all the you know,
if you go look through the banks, 10-K,
you know, some of them break this out.
I think JP Morgan, for example.
And you see that
that's got the highest ROI
by far, that it's bigger than the,
you know, all the other parts of the bank.
So I think they were thinking that I know
got into it.
They paid very high operating costs
and had higher defaults
than, than other ones
that didn't obviously did not work out
because they, they,
they turned away from it.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Well, I'll say something about marketing.
I mean, we all do respect that.
You know, you guys are
you guys are very not elitist.
Here went every anti elitist.
So, marketing is a just a huge industry.
And as a finance person I was like,
we do have a marketing department at
the business school.
And I'm like, oh, there's a reason.
Because you look at let's say
you look at alphabet and meta.
Yeah.
Meta revenues are almost 100% from
I think there's like you had a guest
also talking about this kind of thing.
So, almost 100% from marketing. Yeah.
Who goes are like it close to 80%.
We're talking about
hundreds of billions of dollars a year
and all the very sophisticated stuff.
And at the end, it's.
So, you know, it works. It works.
And I've certainly been taking it.
I get taken in by marketing all the time.
And let's just say one of the say,
one of the thing is, I think the reason
that because the, the ROI is
here are high, though
when we decompose this at the end,
it sort of does most.
If you take the alpha of this,
think of this as alpha
relative to the average bank asset,
we get that it's about a percent.
So how do you get down to a percent.
So the risk premium here is quite big.
We compare it to the risk
premium on bonds.
You have to compare it
to high yield corporate bonds.
And it looks similar for all.
But the lowest Fico bonds versus let's say
triple C rated bonds, where the lowest
Fico seems to have a big chunk or the risk
premium over and above the bonds.
I could actually see the bonds
look a little low
relative to that, because it's the risk
being on credit cards.
It kind of rises linearly,
and it's the bonds that kind of don't.
But for the not so bad credit, it's
pretty similar risk premium to high yield
bond markets.
And that sense doesn't look it's big
but it doesn't look crazy.
But I should say, you know Goldman
I think they when they got it
before they got into credit cards
and it did not work out.
So apparently it is competitive
in that sense.
I think they were eyeing this and saying,
this is this is a good business.
You see, the highest
ROI is by far of all the you know,
if you go look through the banks, 10-K,
you know, some of them break this out.
I think JP Morgan, for example.
And you see that
that's got the highest ROI
by far, that it's bigger than the,
you know, all the other parts of the bank.
So I think they were thinking that I know
got into it.
They paid very high operating costs
and had higher defaults
than, than other ones
that didn't obviously did not work out
because they, they,
they turned away from it.</p>
</details>

### 监管与宏观经济视角下的信用卡利率

ID:
Do you see any signs of rates
eventually coming down?
It sounds like it's probably
not going to be through competition
or new entrants like fintechs,
but could it be something like regulation?
I have vague
memories of the credit card act,
doing something on this front,
but could it be something like that?
The credit card?
There are tons of papers on it
when it came out.
Mostly limited your ability
to increase rates on existing borrowing.
Okay.
And, it it sort of,
put caps on all kinds of fees and charges.
And then people were looking for whether
banks would move that to something else.
I think in the long run,
the answer is yes.
I don't know if they move that
or just something else, but I mean, so
for rates,
if you could just plot it on on Friday,
even though I think it's like a little bit
distorted, it's been going up and up.
I mean, before it starts going
down, it's got to stop going up.
So they, they're in,
pretty strong position,
but they there is this buy now pay later.
They were lending club kind of things
a little.
They largely crashed and burned.
And you know, people payments in general.
I mean, you know, these companies
for payments are huge because there is,
you know, PayPal, these guys,
this is just to take off a little bit off
the top of this swipe fee.
And then we're going to get to the
to the interest rates on this borrowing.
I mean, I think there is constantly
like movement in this space,
but it has not been to drive down
these driven up acquisition costs more
than just driven down the actual rates.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Do you see any signs of rates
eventually coming down?
It sounds like it's probably
not going to be through competition
or new entrants like fintechs,
but could it be something like regulation?
I have vague
memories of the credit card act,
doing something on this front,
but could it be something like that?
The credit card?
There are tons of papers on it
when it came out.
Mostly limited your ability
to increase rates on existing borrowing.
Okay.
And, it it sort of,
put caps on all kinds of fees and charges.
And then people were looking for whether
banks would move that to something else.
I think in the long run,
the answer is yes.
I don't know if they move that
or just something else, but I mean, so
for rates,
if you could just plot it on on Friday,
even though I think it's like a little bit
distorted, it's been going up and up.
I mean, before it starts going
down, it's got to stop going up.
So they, they're in,
pretty strong position,
but they there is this buy now pay later.
They were lending club kind of things
a little.
They largely crashed and burned.
And you know, people payments in general.
I mean, you know, these companies
for payments are huge because there is,
you know, PayPal, these guys,
this is just to take off a little bit off
the top of this swipe fee.
And then we're going to get to the
to the interest rates on this borrowing.
I mean, I think there is constantly
like movement in this space,
but it has not been to drive down
these driven up acquisition costs more
than just driven down the actual rates.</p>
</details>

TA:
Unrelated macro question.
One of the reasons I like
your work is sort of revisiting
some of these, like, basic questions,
which I think is useful.
And of course, when we talked to you
a couple of years ago,
it was like, let's revisit
some of what we thought
we knew about the 70s
and see if that inflation story
was a little bit different.
Just on the big macro question
these days, rates
where they are inflation
sort of persistently warm.
A lot of people like to talk about
our star must be therefore higher than it
otherwise would have been.
What do you think we've learned?
You know, we had this a very fast rate
hiking cycle, 2021 through 2023
that almost, I would say many economists
would have expected the unemployment
rate to rise a lot more,
given that rate hike cycle has and of.
Spending to go. Down.
Yeah, we're spending to go down, etc.
and I'd, I personally,
I'm really satisfied by the stories
that people tell about how,
in fact those rate hikes
translated into lower inflation.
Have you yourself sort of learned
anything interesting in the last,
I don't know, 3 or 4 years,
five years of this macro experiment
that we have post-pandemic.

ID:
My inference, I mean,
I think it's a great topic and question.
My my inference was that,
that the
cycle, I mean, the group
that thought that this was largely
a supply shock issue, that Covid disrupted
supply chains tremendously.
I mean, we saw that and I think if you
look like the New York Fed has this,
you know, index that they put together
on, on, supply disruptions.
Yeah.
This predicted the trajectory of inflation
with the three month lead.
Very well.
I think we had a period where, we saw that
there was increased employment
and yet output was going down.
So usually when we talk about productivity
and things,
there's all these compositional issues.
Do you fire the least productive people.
So productivity
goes up for mechanical reasons.
But when you have more people
being employed
and yet output's going down as it did
for several quarters,
that can't be the reason.
So I took away from it.
You know, there's harsh arguments about
this, that this was largely supply driven.
And how it relates to the 70s is argument
there for different reasons,
was that it was supply driven
due to do the credit crunches and things.
So I tend to think that a lot
of the business cycle things
and the inflation
as we've seen, like after wars, were often
switching the kind of production
that you do, which is a supply thing.
I'm very much in the in the supply camp
and do not think that I think the,
the reason that employment
held up and spending held up,
because I don't think
that this was happening
through decreasing demand
and getting people fired and so forth.
I think it was products,
you know, components could ship again.
And so people could be, you know,
more productive with the with the labor
they had.
So to me, I'm sure some people very,
very highly disagreed.
To me,
that looked like a pretty clear story.
So if you're a Jerome Powell
and you're worried about inflation
going up, and I should just mention
we are recording this on.
October 29th. Yeah.
So the fed decided. There's going to be a
which.
Is widely expected to be a cut. Right.
But you know inflation is still,
you know, somewhat warm.
As Joe said if you're worried about it,
should you be looking at credit card
rates versus, you know, mortgage rates
or benchmark rates or things like that?
How should policymakers
actually think about this problem.
In between those?

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">Unrelated macro question.
One of the reasons I like
your work is sort of revisiting
some of these, like, basic questions,
which I think is useful.
And of course, when we talked to you
a couple of years ago,
it was like, let's revisit
some of what we thought
we knew about the 70s
and see if that inflation story
was a little bit different.
Just on the big macro question
these days, rates
where they are inflation
sort of persistently warm.
A lot of people like to talk about
our star must be therefore higher than it
otherwise would have been.
What do you think we've learned?
You know, we had this a very fast rate
hiking cycle, 2021 through 2023
that almost, I would say many economists
would have expected the unemployment
rate to rise a lot more,
given that rate hike cycle has and of.
Spending to go. Down.
Yeah, we're spending to go down, etc.
and I'd, I personally,
I'm really satisfied by the stories
that people tell about how,
in fact those rate hikes
translated into lower inflation.
Have you yourself sort of learned
anything interesting in the last,
I don't know, 3 or 4 years,
five years of this macro experiment
that we have post-pandemic.
My inference, I mean,
I think it's a great topic and question.
My my inference was that,
that the
cycle, I mean, the group
that thought that this was largely
a supply shock issue, that Covid disrupted
supply chains tremendously.
I mean, we saw that and I think if you
look like the New York Fed has this,
you know, index that they put together
on, on, supply disruptions.
Yeah.
This predicted the trajectory of inflation
with the three month lead.
Very well.
I think we had a period where, we saw that
there was increased employment
and yet output was going down.
So usually when we talk about productivity
and things,
there's all these compositional issues.
Do you fire the least productive people.
So productivity
goes up for mechanical reasons.
But when you have more people
being employed
and yet output's going down as it did
for several quarters,
that can't be the reason.
So I took away from it.
You know, there's harsh arguments about
this, that this was largely supply driven.
And how it relates to the 70s is argument
there for different reasons,
was that it was supply driven
due to do the credit crunches and things.
So I tend to think that a lot
of the business cycle things
and the inflation
as we've seen, like after wars, were often
switching the kind of production
that you do, which is a supply thing.
I'm very much in the in the supply camp
and do not think that I think the,
the reason that employment
held up and spending held up,
because I don't think
that this was happening
through decreasing demand
and getting people fired and so forth.
I think it was products,
you know, components could ship again.
And so people could be, you know,
more productive with the with the labor
they had.
So to me, I'm sure some people very,
very highly disagreed.
To me,
that looked like a pretty clear story.
So if you're a Jerome Powell
and you're worried about inflation
going up, and I should just mention
we are recording this on.
October 29th. Yeah.
So the fed decided. There's going to be a
which.
Is widely expected to be a cut. Right.
But you know inflation is still,
you know, somewhat warm.
As Joe said if you're worried about it,
should you be looking at credit card
rates versus, you know, mortgage rates
or benchmark rates or things like that?
How should policymakers
actually think about this problem.
In between those?</p>
</details>

ID:
I, I think mortgage rates that people,
you know, do seem very much to respond to
it is a much bigger amount.
Maybe they're more sophisticated,
sensitive.
It lasts with you for a long time.
I mean,
I think that's much more important,
the shifts in those spreads
than, for the macro economy.
Then what? The credit card rates
is just not much movement.
I mean, they are literally tacked on
top of the fed funds rate.
So that's completely mechanical.
Didn't used to be the case 30 years ago,
but basically just move one.
The spread will move
one for one with the fed funds rate,
except when they expand it by issuing
new cards and making rates higher.
So I think the mortgage
market's much more important,
for macro kind of stuff.
I mean, I don't envy,
you know, Powell's job.
It's a very hard job now I yeah, not sure.
Yeah. I last time was at the fed.
I was in the elevator when he got in,
but I didn't come up against
I didn't say anything to him,
but I got to see him in person.
Jerome.
Our stars fake.
You know, you talk about fintech, etc..
I consider I personally like,
I actually think stablecoins
are going to be a very big deal.
Yeah, but I am actually not
I do not necessarily
think they're going to be a big deal
for consumer transactions.
It's not obvious to me.
My guess is that to open up
new transactions that we aren't
thinking of right now,
but not for like buying coffee or buying,
you know, whatever, I'm sure.
But from your research,
whether into cards, etc.,
how would that inform your
or other, fintech?
How would that inform your thinking
about the trajectory
of the stablecoin industry in stablecoin?
It's interesting.
And I you know,
I've heard you mention this kind of view,
which I think is not one I'd considered.
I was thinking a lot about consumers.
I'll say this,
I think to for me and some of the people
I talked to my coauthors stablecoin
are they're,
they're like a puzzle in the sense that,
maybe not all stablecoin,
but the ones that have been around
are kind of like a money market fund
that doesn't pay you interest.
That's how I would summarizing, because,
and that's why I think,
you know, these are some of, like,
the most profitable
companies ever per employee
because there's they don't do anything.
Yeah. So if
you give them a bunch of billion dollars,
they just take the whole interest.
There's some advertising there too, but
not a tremendous amount compared to that.
And people are happy with that.
I don't really get it.
But, you know,
now they've like you mentioned,
they've started to
to learn that sort of tricks of the trade.
They're going to do rewards
better than paying people actual interest.
You give them rewards.
So from the point of view of consumers,
it is kind of a mystery.
I mean, I would love to start a money
market fund and not pay anybody
any interest economically.
When you don't pay
any interest on a dollar ever,
you've taken the whole dollar.
That's what the dollar does.
It pays you interest.
So yeah, the net present value of all
the interest of a dollar is the dollar.
So they never pay you
and you stay there forever.
And if they have $8 billion,
they've captured $8 billion.
Again nice business if you can get.
Yeah it's a great business.
It's it's weird but it's a great business.
What's your next research project.
So I think from,
this credit card stuff, there's there's
definitely interesting things
to think about.
You know, how people default.
And you know why,
how much this marketing stuff affects them
from another point of view is,
so, one of my coauthors in here,
a former student of mine,
we have a bunch of, work on,
you know, adjustable rate mortgages
and why they kind of disappeared.
So they used to be a big thing,
and they've kind of disappeared.
And I think we kind of understand why.
So that's that's,
you know, there's been a lot of discussion
about that for mortgages.
Why is the US in one camp
and many other countries in another camp,
but the US kind of used to be
in the adjustable mortgage rate camp,
at least pre-crisis.
And I remember,
when the rate hike when we started surging
do is this popular theory
that monetary policy would have more teeth
in countries like Canada, Australia,
the UK, because so many more households
would be more sensitive to faster reset?
Has that actually been borne out?
It sounds great as like a theory.
Intuitively, that makes a lot of sense.
I do, I guess Canadian unemployment
has trended higher than American, but
does that.
But the inflation trajectories,
I think, have been roughly the same. And
the those other Anglophone countries
versus
the U.S where they had, I don't know,
like how strong effect was that?
Do you know?
I don't know exactly.
But I don't get the impression
that it was tremendously different.
I think it has impacted consumers.
One thing I should note though, is so you
there's two senses in which monetary
policy can have, in effect.
One is that it makes people
have to spend a lot of money on that.
So it's expensive for them.
But the other one is that here,
and I don't think that's the effect
we were going for.
But people have just,
you know, stopped taking out
as many mortgages and don't move.
It was a negative effect.
I'm just not sure it's
a anti-inflationary effect.
So it's like with you,
if you're going to have
floating rate stuff
and that's like the case
with credit cards,
then it shouldn't affect the volume of it
that much in terms of producing it.
But it's kind of people.
It's expensive for them.
And then on the fixed rate, one,
they just stick to the old stuff
and we don't, you know, mortgage
credit's really dried up in a way.
But it's not affecting the,
the existing borrowers only
to the extent that you don't want to move,
which is actually a big deal anymore.
Drexler, thank you so much for,
coming back on out loud.
It's always a treat.
And next time we have a,
new report out, let's talk about
let's talk terms next time.
Okay, great.
Thank you very much for having Tracy.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">I, I think mortgage rates that people,
you know, do seem very much to respond to
it is a much bigger amount.
Maybe they're more sophisticated,
sensitive.
It lasts with you for a long time.
I mean,
I think that's much more important,
the shifts in those spreads
than, for the macro economy.
Then what? The credit card rates
is just not much movement.
I mean, they are literally tacked on
top of the fed funds rate.
So that's completely mechanical.
Didn't used to be the case 30 years ago,
but basically just move one.
The spread will move
one for one with the fed funds rate,
except when they expand it by issuing
new cards and making rates higher.
So I think the mortgage
market's much more important,
for macro kind of stuff.
I mean, I don't envy,
you know, Powell's job.
It's a very hard job now I yeah, not sure.
Yeah. I last time was at the fed.
I was in the elevator when he got in,
but I didn't come up against
I didn't say anything to him,
but I got to see him in person.
Jerome.
Our stars fake.
You know, you talk about fintech, etc..
I consider I personally like,
I actually think stablecoins
are going to be a very big deal.
Yeah, but I am actually not
I do not necessarily
think they're going to be a big deal
for consumer transactions.
It's not obvious to me.
My guess is that to open up
new transactions that we aren't
thinking of right now,
but not for like buying coffee or buying,
you know, whatever, I'm sure.
But from your research,
whether into cards, etc.,
how would that inform your
or other, fintech?
How would that inform your thinking
about the trajectory
of the stablecoin industry in stablecoin?
It's interesting.
And I you know,
I've heard you mention this kind of view,
which I think is not one I'd considered.
I was thinking a lot about consumers.
I'll say this,
I think to for me and some of the people
I talked to my coauthors stablecoin
are they're,
they're like a puzzle in the sense that,
maybe not all stablecoin,
but the ones that have been around
are kind of like a money market fund
that doesn't pay you interest.
That's how I would summarizing, because,
and that's why I think,
you know, these are some of, like,
the most profitable
companies ever per employee
because there's they don't do anything.
Yeah. So if
you give them a bunch of billion dollars,
they just take the whole interest.
There's some advertising there too, but
not a tremendous amount compared to that.
And people are happy with that.
I don't really get it.
But, you know,
now they've like you mentioned,
they've started to
to learn that sort of tricks of the trade.
They're going to do rewards
better than paying people actual interest.
You give them rewards.
So from the point of view of consumers,
it is kind of a mystery.
I mean, I would love to start a money
market fund and not pay anybody
any interest economically.
When you don't pay
any interest on a dollar ever,
you've taken the whole dollar.
That's what the dollar does.
It pays you interest.
So yeah, the net present value of all
the interest of a dollar is the dollar.
So they never pay you
and you stay there forever.
And if they have $8 billion,
they've captured $8 billion.
Again nice business if you can get.
Yeah it's a great business.
It's it's weird but it's a great business.
What's your next research project.
So I think from,
this credit card stuff, there's there's
definitely interesting things
to think about.
You know, how people default.
And you know why,
how much this marketing stuff affects them
from another point of view is,
so, one of my coauthors in here,
a former student of mine,
we have a bunch of, work on,
you know, adjustable rate mortgages
and why they kind of disappeared.
So they used to be a big thing,
and they've kind of disappeared.
And I think we kind of understand why.
So that's that's,
you know, there's been a lot of discussion
about that for mortgages.
Why is the US in one camp
and many other countries in another camp,
but the US kind of used to be
in the adjustable mortgage rate camp,
at least pre-crisis.
And I remember,
when the rate hike when we started surging
do is this popular theory
that monetary policy would have more teeth
in countries like Canada, Australia,
the UK, because so many more households
would be more sensitive to faster reset?
Has that actually been borne out?
It sounds great as like a theory.
Intuitively, that makes a lot of sense.
I do, I guess Canadian unemployment
has trended higher than American, but
does that.
But the inflation trajectories,
I think, have been roughly the same. And
the those other Anglophone countries
versus
the U.S where they had, I don't know,
like how strong effect was that?
Do you know?
I don't know exactly.
But I don't get the impression
that it was tremendously different.
I think it has impacted consumers.
One thing I should note though, is so you
there's two senses in which monetary
policy can have, in effect.
One is that it makes people
have to spend a lot of money on that.
So it's expensive for them.
But the other one is that here,
and I don't think that's the effect
we were going for.
But people have just,
you know, stopped taking out
as many mortgages and don't move.
It was a negative effect.
I'm just not sure it's
a anti-inflationary effect.
So it's like with you,
if you're going to have
floating rate stuff
and that's like the case
with credit cards,
then it shouldn't affect the volume of it
that much in terms of producing it.
But it's kind of people.
It's expensive for them.
And then on the fixed rate, one,
they just stick to the old stuff
and we don't, you know, mortgage
credit's really dried up in a way.
But it's not affecting the,
the existing borrowers only
to the extent that you don't want to move,
which is actually a big deal anymore.
Drexler, thank you so much for,
coming back on out loud.
It's always a treat.
And next time we have a,
new report out, let's talk about
let's talk terms next time.
Okay, great.
Thank you very much for having Tracy.</p>
</details>

### 总结：消费者对价格的“非理性”

Tracy Alloway (TA):
I found that conversation
to be fascinating.
I have to admit, like.
Yeah, like credit cards or the sort of
black box to me, in many respects,
I don't really understand the business
because I don't actually use them
for revolving purposes
or borrowing against them.
I don't think I quite realized how crazy
the numbers are, and I certainly knew
that there are tons of advertising,
including direct mail and credit cards.
But the idea that this is so substantial
that a big part of
what people are paying for here
is the advertising.
That was all very novel to me.
My big takeaway from
this is that, you know, people,
I guess, are not rational,
at least when it comes to credit cards.
Right? The marketing seems to work.

ID:
Yeah, naturally, I'm not rational
because I don't take advantage
of all the points that I could.
And I don't like optimize
in the way I could.
And when I, like, buy
a plane ticket, only part of the time
do I think about, is this the airline?

TA:
Well, you could also argue that
it's rational to like factor in the time
I'm doing it.
That's how I justify
all of this money left on the tax
right by saying I make it rational.
My time is valuable.

ID:
Yeah, my time, is valuable.
It's.
But, you know, if there are all these
other boring products out there
that are cheaper, etc., it does feel like
someone must be able to come along
and make a product.
And yes.
That is let's going to compete on rate
or you're going to be able
to borrow cheaper.
I don't know, maybe Bnpl
will achieve that.
I don't know, I'm going to go take out
a personal finance loan right now.
Go for it.

TA:
Shall we leave it
there. Let's leave it there.
This has been another episode
of the All Thoughts podcast.
I'm Tracy Alloway.
You can follow me at Tracy Alloway.
And I'm Joe Weisenthal.
You can follow me at the store.
For more all thoughts content,
please check out our daily newsletter.
You can find that at bloomberg.com/atlas.
We also have a discord
where you can chat with fellow listeners.
Discord upgrade lots and.
If you like this conversation
then please like or comment.
Or better yet, subscribe.
Thanks for listening.
To.

<details>
<summary>View/Hide Original English</summary>
<p class="english-text">I found that conversation
to be fascinating.
I have to admit, like.
Yeah, like credit cards or the sort of
black box to me, in many respects,
I don't really understand the business
because I don't actually use them
for revolving purposes
or borrowing against them.
I don't think I quite realized how crazy
the numbers are, and I certainly knew
that there are tons of advertising,
including direct mail and credit cards.
But the idea that this is so substantial
that a big part of
what people are paying for here
is the advertising.
That was all very novel to me.
My big takeaway from
this is that, you know, people,
I guess, are not rational,
at least when it comes to credit cards.
Right? The marketing seems to work.
Yeah, naturally, I'm not rational
because I don't take advantage
of all the points that I could.
And I don't like optimize
in the way I could.
And when I, like, buy
a plane ticket, only part of the time
do I think about, is this the airline?
Well, you could also argue that
it's rational to like factor in the time
I'm doing it.
That's how I justify
all of this money left on the tax
right by saying I make it rational.
My time is valuable.
Yeah, my time, is valuable.
It's.
But, you know, if there are all these
other boring products out there
that are cheaper, etc., it does feel like
someone must be able to come along
and make a product.
And yes.
That is let's going to compete on rate
or you're going to be able
to borrow cheaper.
I don't know, maybe Bnpl
will achieve that.
I don't know, I'm going to go take out
a personal finance loan right now.
Go for it.
Shall we leave it
there. Let's leave it there.
This has been another episode
of the All Thoughts podcast.
I'm Tracy Alloway.
You can follow me at Tracy Alloway.
And I'm Joe Weisenthal.
You can follow me at the store.
For more all thoughts content,
please check out our daily newsletter.
You can find that at bloomberg.com/atlas.
We also have a discord
where you can chat with fellow listeners.
Discord upgrade lots and.
If you like this conversation
then please like or comment.
Or better yet, subscribe.
Thanks for listening.
To.</p>
</details>