Unrealistic optimism in consumer credit card adoption

In this paper, we study consumer credit card adoption behavior when individuals are overly optimistic about their future usage of the card. We hypothesized that the more prone consumers are to unrealistic optimism, regarding their future borrowing behavior, the more likely they are to prefer credit cards with features that are sub-optimal in light of their actual borrowing behavior. The two empirical studies we conducted to test these hypotheses have provided supporting evidence. Our findings offer an alternative explanation to the long debated puzzle on the stickiness of credit card interest rate, and have important implications for public policy makers.