Credit Card Usage

In the table below, I have listed a few variables pertaining to existing credit card users.
Banks would like to analyse their prospective credit card customers before they make a decision
to accept or reject their credit card applications. Gathering information to answer questions like
"Is the average credit card debt greater for students?", "Is the average credit rating of married
users greater than that of unmarried users?" etc. could be valuable to a bank in making the
decision on a new credit card application.
Can you come up with some more interesting questions, using the variables given below, to
help banks take an informed decision about credit card applications?

Table 1: Variables in the credit card usage dataset.

Variable Meaning
Income Income of the individual (1000s of dollars)
Limit Credit limit
Rating Credit rating
Cards Number of credit cards
Age Age of the individual
Education Years of education of the individual
Own Owns a house? (Yes/No)
Student Whether a student? (Yes/No)
Married Whether married? (Yes/No)
Region Geographical region (South, East, West)
Balance Average credit card debt of the individual

Suppose that you are an analyst in a reputed bank. Armed with the concepts you have
learned in your statistics course, you set out to answer questions using an evidence based
approach.
Assume that the dataset is a random sample of credit card customers. Assume that the
level of significance α = 0.05, unless otherwise stated.

1. An expert consultant believes that the population average credit card balance is at most
1200 dollars. You believe it is significantly greater than 1200 dollars. For the moment,
assume that the population standard deviation of credit card balance is 1500 dollars.
Conduct a hypothesis test to validate your claim. Also, construct a 95% confidence
interval for the population average credit card balance.

2. In real life, you do not know the population standard deviation of credit card balance.
Conduct a hypothesis test to validate your claim that the population average credit card
balance is significantly greater than 1200 dollars. Also, construct a 99% confidence interval
for the population average credit card balance. Also, construct a 99% confidence interval
for the population average credit card balance.

3. The CFO says that only about 10% of the population of credit card users use exactly one
credit card. You feel that the CFO is wrong and you want to validate your claim that the

1
 population proportion of credit card users having exactly one card is NOT 10%. Conduct
a suitable hypothesis test to validate your claim. Also, construct a 95% confidence interval
for the population proportion of users having exactly one credit card.

4. You believe that the population average credit rating of users who are married is sig-
nificantly greater than that of users who are unmarried. Assume that the population
standard deviation of credit rating for married users is 160 and that for unmarried users
is 150 dollars. Conduct a suitable hypothesis test to validate your claim. Also, construct
a 95% confidence interval for the difference in the population averages of credit rating of
married and unmarried users.

5. You believe that the population average credit rating of users who are married is signifi-
cantly greater than that of users who are unmarried. Assume nothing about the population
standard deviations of credit ratings of married and unmarried users. Conduct a suitable
hypothesis test to validate your claim. Also, construct a 95% confidence interval for the
difference in the population averages of credit rating of married and unmarried users.

6. Suppose that having 1, 2, or 3 credit cards is classified as having a "low" number of credit
cards. Having more than 3 credit cards is classified as having "high" number of credit
cards. You believe that the proportion of high credit card owners among unmarried users
is significantly lower than the proportion of high credit card owners among married users.
Conduct a hypothesis test to validate your claim. Also, construct a confidence interval for
the difference in population proportions of high credit card owners among married and
unmarried users.

7. The CEO believes that the proportions of high credit card users in different regions are
equal. Conduct a hypothesis test to see if there is significant evidence to refute the CEO’s
claim.

8. The CEO believes that whether the user has a high/low number of credit cards is some-
what dependent on whether the user owns a house or not. Is there significant evidence
supporting the CEO’s claim?

9. You believe that there is no significant difference among the population average ratings
of different regions. Is there significant evidence against your claim?