Dividing credit-card costs fairly

Major changes have occurred in the UK in the distribution of the costs associated with credit-card operations, including the introduction of annual fees to cardholders, the lowering of merchant service charges, and the increasing proportion of card-holders paying off their monthly balances completely. The paper describes these changes and compares briefly the resulting fee and cost structure with that in the USA. It then develops a model for distribution of the costs as a many-person cooperative game, akin to Littlechild's work on the distribution of costs in public utilities. It uses this to discuss the results of applying different concepts of fairness to the distribution of costs. Finally it examines what effect there would be on these ‘fair’ divisions of costs if changes in credit scoring start to change the proportion of defaulters and the proportion of those who pay no interest.