Questions: Ethical Dilemma. Chen recently graduated from college and accepted a job in a new city. Furnishing his apartment has proved more costly than he anticipated. To enable him to make purchases, he applied for and received a credit card with a 5,000 credit limit. Chen planned to pay off the balance over six months. Six months later Chen finds that other expenses incurred in starting a new career have restricted him to making only minimum payments. Not only that, he has borrowed on his card to the full extent of its credit limit. Upon returning from work one day, Chen finds a letter from the credit card company offering to increase his limit to 10,000 because he has been a good customer and has not missed a payment. a. Discuss the ethics of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their cards. b. Should Chen accept the credit card company's offer? c. How could Chen use a balance transfer card to help solve his problem? a. What are the ethical responsibilities of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their card? (Select the best answer below.) A. This is not an ethical issue since Chen had not missed a payment. B. Credit card companies are in business to earn a return for their shareholders and are not responsible for the spending habits of their clients. C. Credit card companies have a responsibility to their customers by not enticing them to become overextended. D. Credit card companies are in business to earn a return for their shareholders, but have a responsibility to their customers by not enticing them to become overextended.

Ethical Dilemma. Chen recently graduated from college and accepted a job in a new city. Furnishing his apartment has proved more costly than he anticipated. To enable him to make purchases, he applied for and received a credit card with a 5,000 credit limit. Chen planned to pay off the balance over six months. Six months later Chen finds that other expenses incurred in starting a new career have restricted him to making only minimum payments. Not only that, he has borrowed on his card to the full extent of its credit limit. Upon returning from work one day, Chen finds a letter from the credit card company offering to increase his limit to 10,000 because he has been a good customer and has not missed a payment. a. Discuss the ethics of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their cards. b. Should Chen accept the credit card company's offer? c. How could Chen use a balance transfer card to help solve his problem? a. What are the ethical responsibilities of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their card? (Select the best answer below.) A. This is not an ethical issue since Chen had not missed a payment. B. Credit card companies are in business to earn a return for their shareholders and are not responsible for the spending habits of their clients. C. Credit card companies have a responsibility to their customers by not enticing them to become overextended. D. Credit card companies are in business to earn a return for their shareholders, but have a responsibility to their customers by not enticing them to become overextended.
Transcript text: Ethical Dilemma. Chen recently graduated from college and accepted a job in a new city. Furnishing his apartment has proved more costly than he anticipated. To enable him to make purchases, he applied for and received a credit card with a $5,000 credit limit. Chen planned to pay off the balance over six months. Six months later Chen finds that other expenses incurred in starting a new career have restricted him to making only minimum payments. Not only that, he has borrowed on his card to the full extent of its credit limit. Upon returning from work one day, Chen finds a letter from the credit card company offering to increase his limit to $10,000 because he has been a good customer and has not missed a payment. a. Discuss the ethics of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their cards. b. Should Chen accept the credit card company's offer? c. How could Chen use a balance transfer card to help solve his problem? a. What are the ethical responsibilities of credit card companies that offer to increase credit limits to individuals who make only minimum payments and who have maxed out their card? (Select the best answer below.) A. This is not an ethical issue since Chen had not missed a payment. B. Credit card companies are in business to earn a return for their shareholders and are not responsible for the spending habits of their clients. C. Credit card companies have a responsibility to their customers by not enticing them to become overextended. D. Credit card companies are in business to earn a return for their shareholders, but have a responsibility to their customers by not enticing them to become overextended.
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Solution

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The answer is D: Credit card companies are in business to earn a return for their shareholders, but have a responsibility to their customers by not enticing them to become overextended.

Explanation for each option:

A. This option suggests that there is no ethical issue because Chen has not missed a payment. However, the ethical concern is not about missed payments but about the potential for customers to become financially overextended. Offering increased credit limits to individuals who are already maxed out and making only minimum payments can lead to further financial strain, which is an ethical consideration.

B. While it is true that credit card companies aim to earn a return for their shareholders, this option overlooks the ethical responsibility they have towards their customers. Encouraging customers to take on more debt when they are already struggling can be seen as predatory and irresponsible.

C. This option correctly identifies the responsibility of credit card companies to avoid enticing customers into overextending themselves. However, it does not acknowledge the companies' business objectives, which are also a part of the ethical consideration.

D. This option balances the business objectives of credit card companies with their ethical responsibilities. It acknowledges that while companies aim to earn a return for their shareholders, they also have a duty to act responsibly towards their customers by not encouraging them to take on more debt than they can handle.

b. Should Chen accept the credit card company's offer?

Chen should carefully consider his financial situation before accepting the offer. Accepting a higher credit limit might provide temporary relief, but it could also lead to further debt if he continues to spend beyond his means. Instead, Chen should focus on creating a budget to manage his expenses and explore other options, such as increasing his income or reducing unnecessary spending.

c. How could Chen use a balance transfer card to help solve his problem?

Chen could consider using a balance transfer card to consolidate his debt. A balance transfer card often offers a low or 0% introductory interest rate for a certain period, which could help Chen pay down his debt more quickly by reducing the amount of interest he accrues. However, he should be aware of any fees associated with the transfer and ensure that he can pay off the balance before the introductory period ends to avoid high interest rates. Additionally, Chen should avoid accumulating new debt on the balance transfer card.

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