This study aims to examine that: 1) Is it rational for the rate of interest of credit card sticking and remaining high in Taiwan? 2) Does the rate of the credit card relate to switching cost and operating cost? 3) Does the credit card have the question of adverse selection in the market? Utilizing the monthly data from June of 2004 to December of 2005 for the banks in Taiwan, this study checks the behavior of the rate of interest for credit card and the relationship between the interest rate and the non-performing loans for credit cards using Panel Data models. The result is: Such parameters as the fund cost of banks, the balances of loans and operation size and the business intensity for the credit cards do not have economically significant influence on the interest rate of the credit cards. This result is the same with that foreign studies finding and it may be caused by the interest rate of credit card to be deadlocked for a long time. Therefore, it is unreasonable for the behavior of the rate of interest for credit cards of banks. On the models of the nonperforming loans of credit cards, it is not related with the rate of interest for credit card when operating size or card loans are fixed. This shows that the credit card market does not have the question of the adverse selection in Taiwan. In the other word, non-performing loans will not increase if the rate of interest for credit card reduces.
