‘The Effects of Credit Card Limit Practices of Banks on their Financial Performance and Consumer Brand Preference’: a Study of Banks in Karachi

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‘The effects of Credit Card limit practices of banks on their financial performance and consumer brand preference’:

A Study of Banks in Karachi


Many researchers have aimed to find the different levels of customer preferences regarding financial services (Schmidt, Bergsiek & Kolesnikova, 2007), (Tarawneh, 2006). Schmidt, Bergsiek and Kolesnikova (2007) have also observed that today’s dynamic economy is exposing financial institutions to the increasing competitive forces and performance-oriented pressures. In addition, innovative business ideas and increasing competition increases the challenges for the financial institutions to achieve (Hopkins & Hopkins, 1997).

Based on these dynamics in the financial service industry (Hopkins & Hopkins, 1997), a research study that has been conducted investigated the effects of credit card limits (Ausubel, 1999) on customer brand preference (Schmidt, Bergsiek & Kolesnikova, 2007) and bank’s financial performance (Tarawneh, 2006). In today’s time it is very difficult to prejudge the bank’s credit limit (Feinberg, 2003).

In recent years, performance study of banks has received higher attention (Seiford & Zhu, 1999). According to the study, bank’s financial performance includes growth and changeability in the profits of the banks, cash flows and market value of the assets and equity of the financial institutions (Capon, Farley & Hoenig, 1990). Moreover, financial institutions lack knowledge about the risk involved with the individual borrower (Dey & Mumy, 2005).

The goal of this study is to determine customer brand preferences (Schmidt, Bergsiek & Kolesnikova, 2007 ) and evaluate bank’s financial performance (Tarawneh, 2006) based on the factor of credit card limit practices (Dey & Mumy, 2005) . This study tries to determine the differences in customer preference in choosing a particular brand (Schmidt, Bergsiek & Kolesnikova, 2007) and provide an understanding to what extend financial institutions grow due to the extensive use of credit card limit (Tarawneh, 2006).


To study the effects of credit card limits practices of banks on their financial performance and consumer brand preference.


The Variables on the left side of the Model are treated as a cause of bank’s financial performance (Tarawneh, 2006) and consumer brand preference (Schmidt, Bergsiek & Kolesnikova, 2007) regarding the financial institutions. These variables are taken because no study has been done on such combination in Pakistan. The study will be conducted through testing these variables in the banks of Karachi and through consumers in Karachi to determine the effect of Credit Card limits and practices on the bank’s financial performance and consumer brand preference.


Independent Variable:

  • Credit Card limits practices: Credit Card is a way through which consumers borrow money. By using a credit card, consumers can make purchases without the use of cash (Dey & Mumy, 2005). Banks propose a fixed limit to their likely consumers (Dey & Mumy, 2005).

Dependent Variable:

  • Bank’s Financial Performance- Bank’s capacity to conserve on operating expense they incur in constructing their customer and giving customer services (Pastor, Lovell & Tulkens 2001). The higher the financial performance, the higher and more improved will be the activities and functions of the institution (Tarawneh, 2006).
  • Consumer Brand Preference- Consumer’s compliance to give an amount for a brand depends on previous experiences (Bronnenberg & Dube, 2010). Consumer’s choice related to banks according to the frequency of visit to the representative, most preferred modes of communications or services offered by the bank (Chernev, 1997).


H1;Higher level of Credit Card Limits has a relation with Bank’s Financial Performance.

H2; Higher level of Credit Card Limits has a relation with Consumer brand Preference.


The sources of information are primary as well as secondary which includes the financial reports of the Banks of Karachi along with the consumers availing the financial institution’s services. The study will try to reach to the consumers directly engaged with the service for gaining the best available information regarding the effects of credit card limits and practices.


The study proposes convenience sampling technique which is a non-probability sampling technique where subjects are selected because of their convenient accessibility and proximity to the researcher. The subjects are selected just because they are easiest to recruit for the study and the researcher did not consider selecting subjects that are representative of the entire population. Convenience based sampling is chosen because of the following reasons:

  • Time limitation
  • Resources Limitation

The Sampling procedure would be that the researcher visits the concerned organization decided upon and where ever a manager is found willing to participate he/she will be filling the instrument of data collection.


The Study proposes a sample of 250 Consumers who are either consuming the credit card service or any other services provided by different banks.


The Survey will be conducted through questionnaires given to the consumers availing bank services to fill out and gather information in order to determine the factor that affects consumer’s preferences of selecting financial institutions. Then statistical tests will be conducted in order to gather / analyze the results and as far as the procedure is concerned the questionnaires will get filled by getting them filled personally from the consumers of the banks in Karachi.


Questionnaires developed will help the study to determine the effect of credit card limits and practices on the bank’s financial performance and consumer brand preference. Test will be conducted on dependent and independent variables of financial performances of banks and consumer brand preference. The Questionnaire is proposed to have 10 questions, where all the questions are closed ended on the basis of a likert scale.


Following test would be used to check the variables.

  • Regression
    • To check whether the relation between the variables exist of not.
  • Co-relation
    • To check the magnitude of variables.


The research might show the following possible outcomes:

  • Financial Performance of banks has direct relation with the credit limits practices of banks.
  • Consumer Brand Preferences has indirect relation with the credit limits practices of banks.


Alex Chernev [1997], “The Effect of Common Features on Brand Choice: Moderating Role of

Attribute Importance”, Journal of Consumer Research Inc., Vol 23.

Bart J. Bronnenberg, Jean Pierre H. Dube & Mathew Gentzkow [July 2010], “The Evolution of Brand Preferences: Evidence from Consumer Migration”, University of Chicago and NBER.

Jesus T. Pastor, C. A. Knox Lovell and Henry Tulkens [2001], “Evaluating the Financial Performance of Bank Branches”, Department of Economics, University of Georgia.

Lawrence M. Ausubel [1999], “Adverse Selection in the Credit Card Market”, Department of Economics, University of Maryland

Lawrence M. Seiford and Joe Zhu [Sept. 1999], “Profitability and Marketability of the Top 55 U.S. Commercial Banks”, Management Science, Vol 45 No.9, pp 1270-1288.

Martina K. Schmidt, Micha Bergsiek and Marina Kolesnikova [2007], “Customer Preference of financial services across the US, Russia and Germany”, Journal of International Business and Cultural Studies.

Medhat Tarawneh, [2006], “A Comparison of Financial Performance in the Banking Sector: Some Evidence from Omani Commercial Banks”, International Research Journal of Finance and Economics, Issue 3, Euro Journal Publishing Inc.

Noel Capon, John U. Farley, Scott Hoenig [1990], “Determinants of Financial Performance”, Management Science, Vol 36 No.10, pp 1143-1159.

Willie E. Hopkins and Shirley A. Hopkins [Sept.1997], “Strategic Planning- Financial Performance Relationships in Banks; A Causal Examination”, Strategic Management Journal, Vol 18 No.8 pp 635-652, published by: John Willey & Sons.

Robert M. Feinberg [Jul., 2003], “The Determinants of Bank Rates in Local Consumer Lending Markets: Comparing Market and Institution-Level Results”, Southern Economic Journal, Vol. 70, No. 1, pp. 144-156.

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‘The effects of Credit Card limit practices of banks on their financial performance and consumer brand preference’: A Study of Banks in Karachi. (2017, Jun 26). Retrieved January 29, 2023 , from

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