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Black Coffee and Black Cards (A)
Fairchild, Gregory B. Case F-1882 / Published August 5, 2019 / 10 pages.
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Product Overview

This case follows the recently married Shane and Erin as they explore the world of credit cards. Shane, a musician with an irregular salary and a spotty job history, was raised to avoid credit by his parents who had emigrated from a communist Eastern Europe. Erin, a marketing manager in a baby-formula company, has a steady salary but knows little about credit cards. Shane offers to do some research and report back in a week. This case reveals the complexity of the credit card business and the risks and rewards to a consumer that uses a financial product. In particular, users should recognize that the risk of having a credit card is how it might influence their consumption behavior. Credit cards offer a variety of conveniences, but they are an expensive form of short-term debt that can become an onerous burden if used beyond the means of the cardholder. Thus prudent use of credit cards is a key learning objective of both the A and B cases.


Learning Objectives

?Developing a decision process that focuses on relevant information ?Understanding that risk and return are the key aspects of any financial decision ?Comparing costs and benefits of a credit card ?Understanding the business model for a credit card issuer?risks and returns they face ?Understanding the convenience and the economic incentives of credit cards ?Understanding the consequences of excessive consumption and excessive consumer debt ?Learning the "language" of credit: float, annual percentage rate (APR), credit limit, prime rate, FICO score, secured card, authorized user, cosigner, and so on ?Understanding the importance of maintaining a high credit score ?Demonstrating comparison-shopping skills ?Developing an effective debt-management strategy ?Understanding that credit cards are financial products that are designed to have different attributes to appeal to specific customer segments

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  • Overview

    This case follows the recently married Shane and Erin as they explore the world of credit cards. Shane, a musician with an irregular salary and a spotty job history, was raised to avoid credit by his parents who had emigrated from a communist Eastern Europe. Erin, a marketing manager in a baby-formula company, has a steady salary but knows little about credit cards. Shane offers to do some research and report back in a week. This case reveals the complexity of the credit card business and the risks and rewards to a consumer that uses a financial product. In particular, users should recognize that the risk of having a credit card is how it might influence their consumption behavior. Credit cards offer a variety of conveniences, but they are an expensive form of short-term debt that can become an onerous burden if used beyond the means of the cardholder. Thus prudent use of credit cards is a key learning objective of both the A and B cases.

  • Learning Objectives

    Learning Objectives

    ?Developing a decision process that focuses on relevant information ?Understanding that risk and return are the key aspects of any financial decision ?Comparing costs and benefits of a credit card ?Understanding the business model for a credit card issuer?risks and returns they face ?Understanding the convenience and the economic incentives of credit cards ?Understanding the consequences of excessive consumption and excessive consumer debt ?Learning the "language" of credit: float, annual percentage rate (APR), credit limit, prime rate, FICO score, secured card, authorized user, cosigner, and so on ?Understanding the importance of maintaining a high credit score ?Demonstrating comparison-shopping skills ?Developing an effective debt-management strategy ?Understanding that credit cards are financial products that are designed to have different attributes to appeal to specific customer segments