INTRODUCTION 1.

1Background A credit card is a small plastic card with some numbers embossed on it and which helps to purchase the things with no requirement of cash in pocket. It is 3-1/8 inches by 2-1/8 inches in size and has identification information for example a signature or picture.

It permits the person named on it to charge purchases or services to his account charges for which he will be billed periodically. This information is checked where we use it for example by automated teller machines (ATMs), store readers, Internet computers and banks Credit cards give rise to supplementary cards or relationship cards. The principle Cardholder may apply for Supplementary Card by submitting the Supplementary Card application signed by the Primary Cardholder and the assigned Supplementary Cardholder. The issuance of the Supplementary Card will be subject to the evaluation and approval of the Issuer. The use of Supplementary Card shall be governed by this Agreement. According to the state bank of Pakistan the number of Credit Cards in use in Pakistan is 1.547 million (As of June, 2008).This includes, Basic and supplementary cards as well as multiple card holders

The trend of credit cards as well as supplementary card is rising rapidly, making the consumers feel convenient in making their purchases by signing just a piece of paper which arouses the feeling of making impulse purchase among its consumers, because of this convenience, the card holders might be making frequent impulse purchases

Impulse buying is defined as an unplanned purchase that is characterized by (1) relatively rapid decision-making, and (2) a subjective bias in favor of immediate possession (Rook& Gardner, 1993, p. 3; see also Rook, 1987; Rook & Hoch, 1985). Signing a piece of paper instead of paying cash at the time of purchase can easily be forgotten by the consumers, and hence it can result in increased monthly budget and over spending. Keeping in mind the factors like : convenience, temptation, security , status symbol, the consumers of supplementary cards might have tendency to make impulse purchase by having supplementary cards

1.2 Statement of the Problem The research is trying to analyze if the use of supplementary cards stimulates the impulse buying tendency of the consumers, increasing their budget limits, or is it dependant on gender, age or other factors. Research shows that older individuals demonstrate greater regulation of emotional expression than do younger adults Individuals currently enjoy a wide variety of payment options include cash, cheques, debit cards credit cards and supplementary cards Although many of these methods are very convenient, they can also cause many problems: The temptation is very easy to overspend because you dont need to pay for your purchases upfront, somehow signing a piece of paper at the time of purchase doesnt always feel like you are actually spending money. Inspite of the temptation that the consumer feels, he is also gathered by the fear and hesitation to spend because the monthly bill will be handed over to the principle holder

One of the biggest disadvantages to using supplementary cards is the extremely high interest fees charged by the credit card companies which gets the consumers into trouble

Being billed once a month, it is very easy to forget about purchases you have made using a supplementary card. Carrying an unpaid balance for an extended period can get the card holder into financial debts.

Purpose of the Research The purpose of this research is to find out if the use of supplementary cards affects the buying pattern of its users and drags them towards making impulse purchase or not. Through this research it has to be found out if this attitude is practiced by one gender only or both because impulse purchase is an emotional attitude and is more likely to be observed among female individuals. Through this research we will find out the result of two forces acting at the same time: Temptation to over spend and make unplanned purchases because of the

availability of the money in the form of plastic money with a high credit limit Restriction and the fear of overspending because the monthly billing details

will be handed over to the principle holder and will result in investigative questions and justifying the expenditure It has to be observed that under the influence of these two pressures at the same time does the consumer come under the spell of making unplanned purchases by looking at attractive and catchy displays or does he restrict himself from over spending Research Questions Primary questions Q1. Does the availability of supplementary cards influence the buying behavior of consumers? Q2. Do the supplementary card holders feel reluctance in over using it? Secondary question

Q3. When do the consumers use cash or supplementary cards to finance their purchases?

Scope: This research is spread across middle class people with the age group of 20-50 yrs and the research is restricted to people of Karachi only 1.6 Justification: All the bankers, marketers, business school students and all the consumers of supplementary cards are the target audience of this research and by this research the target audience will have a clear idea of the relationship between supplementary cards and impulse purchases made by the consumers under its influence

CHAPTER 2

LITERATURE REVIEW 2.1 Supplementary cards

The opportunity to share the privileges and benefits of the Banking Cards with the family is done by supplementary cards also called as relationship cards. Supplementary cards are Banking Cards for family members of principle card holders. In principle, only persons with the same surname as the account holder may be issued a supplementary card. Credit limits are assigned by the principle holder to manage the spending by the supplementary card holder Through the supplementary cards the family members feel protected as they will not have to carry large amounts of cash with them and can make any transactions, safely and conveniently and the rewards are also enjoyed by the supplementary card holders as well The focus of this research is not on the credit cards holders but only on the supplementary card holders, since the expenses made by the supplementary card holders are to be paid by the principle card holder, the research is to identify if the supplementary card holders feel reluctant in over using it because of the fear of the budget limit and the bills to be paid by the principle card holder, often rewards points are also gained on every purchase made by the supplementary card It has been observed in previous researches that the existence of credit cards has increased the budget limit of its users, making impulse purchase: an un unplanned purchase, this research tends to explore if the practice is similar with the supplementary card holders or different To have a better understanding of the text it is important to understand what impulse purchase actually is.

2.2 Impulsive behavior

Impulse buying is defined as an unplanned purchase that is characterized by relatively rapid decision-making (Rook & Gardner, 1993, p. 3; see also Rook, 1987; Rook & Hoch, 1985). It is describe-+d as more arousing, less deliberate, and more irresistible buying behavior compared to planned purchasing behavior. Highly impulsive buyers are likely to be unreflective in their thinking, to be emotionally attracted to the object, and to desire immediate gratification (Hoch & Loewenstein, 1991; Thompson et al., 1990). These consumers often pay little attention to potential negative consequences that may result from their actions (Hoch & Loewenstein, 1991; Rook, 1987; see also OGuinn & Faber,1989). Several studies demonstrate the effect of consumers moods and affective states on impulsive buying behavior. Rook and Gardner (1993) found that consumers positive moods were more conducive to impulsive buying than negative moods, although impulse buying occurred under both types of moods. Beatty and Ferrell (1998) also found that a consumers positive mood was associated with the urge to buy impulsively, while the impulse buyers in Weinberg and Gottwalds (1982) study were more emotionalized than nonbuyers
Marketers and retailers tend to exploit these impulses which are tied to the basic want for instant gratification. For example, a shopper in a supermarket might not specifically be shopping for confectionary. However, candy, gum, mints and chocolate are prominently displayed at the checkout aisles to trigger impulse buyers to buy what they might not have otherwise considered.[1] Alternatively, impulse buying can occur when a potential consumer spots something related to a product that stirs a particular passion in them, such as seeing a certain country's flag on the cover of a certain DVD. Sale items are displayed in much the same fashion. Impulse buying happens when you get caught up in the hype of a situation and you buy something without thinking much about it. Impulse items may be new

products, samples or well-established products at unexpected low prices or it might be because of the convenience of buying because of the availability of online shopping and cash in the form of plastic money

Impulse buying is a pervasive and distinctive aspect of a consumer' lifestyles and also a focal point of considerable marketing management activity. Research dating back over 35 years reports impulse purchasing to be widespread among the consumer population and across numerous product categories (Ap-plebaum 1951; Clover 1950; Katona and Mueller 1955; West 1951). More recently, one study found that between 27 and 62 percent of consumers' department store purchases fell into the impulse category and that few product lines were unaffected by impulse buying (Bellenger, Robertson, and Hirschman 1978). Marketing innovations such as credit cards, cash machines, "instant credit," 24-hour retailing, home shopping net-works, and telemarketing now make it easier than ever before for consumers to purchase things on impulse. Also, there is some evidence that the Calvinistic sense of sin about spending is less severe today than it has been in the past (Albee 1977; Longman 1985; Meninger 1973). Despite all of this, there has been little consensus about what impulse buying actually is (Kollat and Wil-lett 1969; Rook and Hoch 1985). Consequently, we know surprisingly little about the contents and dynamics of consumers' buying impulses. 2.3 Psychological impulses

One authoritative and comprehensive definition of a psychological impulse describes it as: "a strong, sometimes irresistible urge; a sudden inclination to act without deliberation" (Gol-denson 1984, p. 37). An impulse is not consciously planned, but arises immediately upon confrontation with a certain stimulus (Wolman 1973) psychological impulse occurs suddenly and spontaneously. Once it gets triggered, an impulse encourages immediate action, and the urge may be powerful and

persistent. Impulses sometimes prove irresistible. However, a behavior is not impulsive simply because it occurs swiftly but habitual behavior is relatively automatic though not necessarily impulsive. Also, in emergencies individuals are apt to act immediately, but this may be more an instinctive than an impulsive response. In a general sense, impulsive behavior has been a target of philosophical discussion for many years. It is a central theme of the legend of Adam and Eve (Ainslee 1975), and the focal point of fables such as "The Grass-hopper and the Ant." From a more formal perspective, economists have long observed people who sharply and foolishly discount the future (Jevons 1871/19 11; Mill1848/1909; Samuelson 1937; Strotz 1956). More recent economic analyses focus on the psychological conflict that sometimes arises from consumers' choices between saving and impulsive spending (Thaler and Shefrin 1981). Some early socio-logical analyses concluded that the failure to learn effective impulse control is more prevalent among the lower classes (Hollingshead 1949; Whyte 1943), but the findings are inconclusive (Phypers 1970; Strauss 1962). 2.4 Consumers' buying impulses-in a retail environment

Although impulsive behavior can occur in any setting, consumer impulse buying is an extensive everyday context for it. In the modern marketplace, spontaneous urges to buy and consume often compete with the practical necessity to delay the immediate gratification that buying provides. Market researchers have had a long-standing interest in this pervasive phenomenon, but many questions about impulsive purchase behavior still remain unanswered. A Critical Review of Impulse Buying Research Extensive research on impulse buying began in the early 1950s and sought to investigate those purchase decisions that are made after the consumer enters a re-tail environment. The DuPont Consumer Buying Habits Studies (1948-1965), and also studies

sponsored by the Point-of-Purchase Advertising Institute (e.g., Pat-terson 1963), gave an impetus to impulse buying research during this period. The DuPont studies provided the paradigm for most early research and defined impulse buying as an "unplanned" purchase. This definition was typically operationalized as the difference between a consumer's total purchases at the completion of a shopping trip, and those that were listed as intended purchases prior to entering a store. Numerous studies subsequently investigated the frequencies of unplanned "impulse" buying across various product categories (Applebaum 1951; Clover 1950; Katona and Mueller 1955; West 195 1), and in different retail settings (Clover 1950; Consumer Buying Habits Studies 1965). Impulse buying research proliferated and extended to investigations of how merchandising stimuli such as retail shelf location (Patterson 1963) and amount of shelf space (Cox 1964) affected impulse buying. Other studies discovered the types of circumstances in which consumers buy things without prior planning (Stern 1962) and examined the relationships between consumers' demographic and lifestyle characteristics and their impulse buying susceptibility (Kollat and Willett 1967). As impulse buying research grew more extensive, it also came under widespread theoretical and methodological attacks. Two problems emerged to cloud the findings of these earlier studies. First, the taxonomical research approach that classified products into impulse and non impulse categories tends to obscure the fact that almost anything can be purchased on impulse (Kollat and Willett 1969; Shapiro 1973; Stern 1962). Today, impulse buying is still widely discussed in terms of which products are and are not impulse items (Assael 2.5The buying impulse

A taxonomical approach can be useful, but it tends to divert attention from the internal motivation and its expression that are crucial to the impulsive purchase. According to Ballenger et. Al (1978),

rook and hoch says it is people, not products, who experience consuming impulses (Rook and Hoch 1985). According to bellenger et. al (1978), assael defines buying behavior as also, the taxonomical orientation commonly conceives of impulse buying as involving only the purchase of low-priced, low-involvement goods . Impulse buying's product dimensions extend well beyond snack items and gossip magazines to the outer limits of one's cash and credit. An extra TV set, a VCR, a larger microwave oven, an important piece of furniture, and a vacation cruise can all be im-pulse purchases as can a package of potato chips or a candy bar. A second problem afflicting impulse buying research is the absence of an adequate theoretical framework to guide empirical work. Some time ago Nesbitt (1959) argued that some shopping behavior that is characterized as unplanned, or impulse buying, may actually be a form of in-store planning that a shopper uses to finalize his/her intentions. Planning is a relative term; consumers' plans are sometimes contingent and altered by environmental circumstance. Stern (1962) and Kollat and Willett (1969) both criticized the "unplanned purchase" definition as too vague and as encompassing too many different types of behavior. The operational procedures used to measure "unplanned" impulse buying are also problematic (Pollay 1968). When defined as the difference between actually concluded and previously planned acquisitions, impulse buying is difficult to measure accurately because consumers may be unable or unwilling to fully articulate their prepurchase intentions (Kollat and Willett 1969). Estimates of impulse purchases are likely to be exaggerated when a particular shopper uses the retail store itself as a memory cue. Remembering that one needs a gallon of milk or some toilet paper does not commonly involve truly impulsive behavior (Stern 1962). Not all unplanned purchases are impulsively decided. On the other hand, impulse purchase estimates will be attenuated when a product item is on the planning list, but the actual brand purchase was made on impulse. Despite all of this criticism, impulse buying is still widely

characterized as "unplanned" purchase behavior (Bellenger et al. 1978; Cobb and Hoyer 1986; Engel, Blackwell, and Kollat 1978), although there have been some recent attempts to reexamine the impulse buying concept (Kroeber-Riel 1980; Rook and Hoch 1985; Weinberg and Gottwald 1982). Discussion has not yet offered a behavioral model that explains impulse buying by linking it to other types of impulsive behavior. Nor has the extant research provided a comprehensive, descriptive account of impulse buying's psychological contents. Most research has been conducted without the theoretical grounding that descriptive, phenomenological analyses often yield (Anderson 1983; Desh-pande 1983; Glaser and Strauss 1967). As a result, we really know very little about what happens when consumers experience the impulse to buy. In a general sense, most large-scale models of consumer behavior have failed to account explicitly for im-pulse buying behavior. Impulse buying is reactive behavior and often involves an immediate action response to a stimulus (Kroeber-Riel 1980). In most models, arousal and purchase are linked indirectly and depicted as mediated by "perceptual bias," "information re-called," and "intention" (Howard and Sheth 1969) or by "overt search" and "long-term memory" (Howard 1977). These models do not explain situations where arousal leads directly to action. Engel, Kollat, and Blackwell (1968) depict this as occurring as a result of "unanticipated circumstances," but this category is too broad. A reconceptualization of Impulse Buying The term "impulse buying" refers to a narrower and more specific range of phenomena than "unplanned purchasing" does. More importantly, it identifies a psychologically distinctive type of behavior that differs dramatically from contemplative modes of consumer choice. This article defines impulse buying in the following way: Impulse buying occurs when a consumer experiences a sudden, often powerful and persistent urge to buy some-thing immediately. The impulse to buy is hedonically complex and may stimulate emotional conflict. Also, impulse buying is prone to occur with diminished regard for its

consequences. Impulse buying is relatively extraordinary and exciting; contemplative buying is more ordinary and tranquil (Weinberg and Gottwald 1982). Buying impulses are often forceful and urgent; contemplative purchasing is less so. Also, impulse buying is a fast experience, not a slow one. It is more likely to involve grabbing a product than choosing one. Impulsive behavior is more spontaneous than cautious. A buying impulse tends to disrupt the consumer's behavior stream, while a contem-plative purchase is more likely to be a part of one's regular routine. Impulse buying is more emotional than rational, and it is more likely to be perceived as "bad" than "good." Finally, the consumer is more likely to feel out-of-control when buying impulsively than when making contemplative purchases. This interpretation is close in spirit to the "pure impulse" behavior that Stern (1962) identified but failed to elaborate with much detail, and it is consistent with most behavioral science approaches to explaining impulsive human behavior. Also, it corresponds with popular everyday characterizations of impulsive urges to buy and consume 2.6 Impulse spending

Early research used the terms impulse buying and unplanned buying synonymously (Kollat and Willett 1969). This conceptualization led researchers to classify products in terms of whether they were likely to be purchased impulsively (e.g., Applebaum 1951). By the 1970s, however, researchers had begun to question whether products could reasonably be classified as impulse items and concluded that all products could be purchased impulsively. In the 1980s, important works by Rook (1987) and Rook and Hoch (1985) clarified the nature of impulse buying. Rook and Hoch (1985, 23) aptly noted, It is the individuals, not the products, who experience the impulse to consume.This statement led to a redefinition of impulse buying as a sudden and powerful urge that arises within the consumer to buy immediately (Beatty and Ferrell

1998; Rook 1987). Impulsive purchasing was now defined as involving spontaneous and unreflective desires to buy, without thoughtful consideration of why and for what reason a person should have the product (Rook 1987; Rook and Fisher 1995; Verplanken and Herabadi 2001). Recent research has reflected this viewpoint by distinguishing between people who are impulsive buyers and those who are not (Rook and Fisher 1995; Youn and Faber 2000). Although such effort is valuable, it obscures the facts that almost everyone engages in occasional impulse spending and that even identified impulse buyers can and do control their impulses at times. One factor that has been found to influence impulsive buying is affect. When asked to name the single mood that most often preceded an impulse purchase, respondents most frequently mentioned pleasure, followed by carefree andexcited (Rook and Gardner 1993). Impulsive buying when in a negative mood is also common (Rook and Gardner 1993). Shoppers in negative moods may be actively attempting to alleviate the unpleasant mood (Elliott 1994). This explanation for impulse shopping is consistent with findings on self-gifting, a behavior often motivated by attempts to cheer oneself up or be nice to oneself (Mick and Demoss 1990). Perhaps the most compelling explanation for why people engage in impulse buying was presented by Hoch and Loewenstein (1991) in their writing on time-inconsistent preferences. According to this view, consumer decisions represent an ever-shifting conflict between desire and willpower. When desire for a product outstrips consumers intentions not to make the purchase, impulse buying can result. This conceptualization highlights the two separate mechanisms involved in impulsive spending: (1) the desire to buy and (2) the ability to exercise control over this urge. Prior work on impulse buying has stressed factors that influence desire for goods. For example, physical proximity can stimulate sensory inputs that affect desire. Touching products in a store, tasting free samples of food, sniffing enticing aromas, or test-driving a luxury

automobile can enhance desire to purchase a good (Faber and Vohs 2004). A recent analysis by Belk and colleagues (Belk, Ger, and Askegaard 2003) provided a multifaceted portrait of desire, noting that desire has its roots in motivation, historical and society trends, and, ultimately, morality. In contrast, the current approach focuses on the role of self-control (compare to willpower) in impulsive spending. Past research has shown that, at the trait level, being controlled (as opposed to being impulsive) is negatively related to impulse buying (Youn and Faber 2000) and positively correlated with the percentage of personal income saved (Romal and Kaplan 1995). Previous work was encouraging insofar as it suggested that generally having good self-control helps consumers not to buy impulsively. The consensus among behavioral scientists is that an individual's market behavior is closely related to his social class.' Social class is often considered more important than income in affecting buying behavior.2 Pierre Martineau describes this phenomenon as follows: "While income has generally been the most widely used behavioral indicator in marketing, social class membership provides a richer dimension of meaning. The individual's con-sumption patterns actually symbolize his class position, a more significant determinant of his buying behavior than just income." However, this generally accepted statement has not been tested in the consumer credit area.4 Based on the above proposition, it would appear logical to consider individuals' consumption patterns as symbolic of their class position. Thus, membership in a social class should influence consumers' credit card use patterns to a greater extent than their income level. This research examines the effect of social class membership and income on consumer credit card behavior. It was hypothesized that installment and convenience use of credit cards would vary among social classes within an economic level. Thus, the higher the individual's social class, the greater his ability to defer his gratifications.

CONSUMERS DECISION TO USE CREDIT The provision of consumer financing has become a pervasive tool for many marketers worldwide (Glass- man 1996). Simultaneously, consumer debt has soared to record levels and an alarming number of households are finding themselves in financial difficulties (Andelman 1998, Monthly Review 2000). Given these trends in the consumer marketplace, a surprisingly sparse amount of research has attempted to study a consumer's decision to use credit. It is easier to buy on impulse. When you have the ability to pay for something there and then on the spot means that you are more likely to pay for something on your credit card. This means you are more likely to get into debt buying things that would normally be either too expensive or a luxury. The biggest disadvantage is that this piece of plastic is so easy to use that it encourages people to spend money that they do not have. Since one is required to pay a fixed amount every month, spending up to 200 or 500 seems like free money at all times. It creates an avenue for increase impulse buying; it can blow up your monthly budget. Why should consumers use credit to finance purchases? The life-cycle hypothesis (Modigliani and Brumberg 1954) posits that consumers attempt to maintain their lifestyle and consumption baskets over their lifetime even though their income and wealth may fluctuate over time. Specifically, older consumers can borrow from their past savings and consume at levels beyond their current incomes. Conversely, young consumers who expect future incomes to be higher than their present income can "borrow from their future income" to support their present life- style. These processes have been referred to as consumption smoothing (Shefrin and Thaler 1988). The availability of credit facilitates consumption smoothing and hence a rational consumer can use credit to intertemporally maximize lifetime utility. However, an economically rational intertemporal reallocation of income requires a fair degree of cognitive complexity on the part of

the consumer, an assumption that has been shown to be unrealistic (cf. Johnson et al. 1987, Kotlikoff et al. 1988). Given this cognitive handicap, how do consumers intertemporally allocate incomes? What factors influence this decision? In the present research, we focus on the decision to borrow from future income. We agree with prior behavioral research that consumers are unable to correctly value their present and future resources, and that they lack the cognitive capability to solve the intertemporal optimization problem required by the life-cycle hypothesis. Furthermore, we argue that consumers use external information such as the avail- ability of credit to infer their future earnings. Specifically, if consumers have easy access to large amounts of credit, they are likely to infer that their lifetime income is high and hence their willingness to use credit will also be high. Conversely, consumers who are granted lower amounts of credit are likely to infer that their lifetime income will be low, and hence be less likely to use credit. However, we also argue for a moderating role of the credibility associated with the credit limit. Specifically, we argue that the above effect of credit availability would be particularly strong for consumers who believe that the credit limit credibly represents their future earnings potential (such as a naive consumer who has limited experience with consumer credit). However, as consumers gain experience with credit, they start discounting credit availability as a predictor of their future income. Hence, with experience the effect of credit limit on the willingness to use credit is attenuated. In recent years, the use of credit cards and other forms of credit has increased tremendously. The increase in borrowing has, in many cases, led to personal financial problems such as personal bankruptcies and bad credit histories. Having a bad credit history makes it more difficult and expensive for a person to make a loan later. Credit problems arise because people borrow too much money without realizing the cost of borrowing. In addition to having to repay the loan, the borrower also has to pay interest on the loan. Interest is the cost of borrowing money and is

calculated as a fixed fraction of the total loan amount. Interest payments reduce the amount of money the borrower can spend on other expenses. CREDIT CARDS GIVING RISE TO SUPPLEMENTARY CARDS Credit cards give rise to supplementary cards or relationship cards. The principle Cardholder may apply for Supplementary Card by submitting the Supplementary Card application signed by the Primary Cardholder and the assigned Supplementary Cardholder. The issuance of the Supplementary Card will be subject to the evaluation and approval of the Issuer. The use of Supplementary Card shall be governed by this Agreement. According to the state bank of Pakistan the number of Credit Cards in use in Pakistan is 1.547 million (As of June, 2008).This includes, Basic and supplementary cards as well as multiple card holders A lot of research has been done regarding the behavior of credit card holders, in this research the behavior of supplementary card holders has to be analyzed to see their buying behavior and purchasing pattern under the credit restriction and urge to make impulse purchase