Business

Why Middle Age May Be Healthy For Your Wallet

Your Financial Savvy

May Hit Its Peak at 53,

Survey of Data Suggests

March 22, 2007; Page A1 WSJ

Baseball players are said to peak in their late 20s. Chess players in their mid-30s. Theoretical economists in their mid-40s.

But in ordinary life, there's an obvious tension between sheer smarts, often seen in the supple minds of the young -- and experience, which comes only with age.

Which one is more valuable in making personal-finance decisions?

A quartet of economists think they have found an answer. In looking at which consumers get stuck paying those pesky credit-card fees, the economists noticed a puzzling pattern: Younger and older consumers were more likely than others to get hit with easily avoided fees. So the economists expanded their inquiry to loans and other products, and sifted through records of tens of thousands of consumers.

They found that middle-aged adults tend to borrow at lower interest rates and pay fewer fees than younger and older adults. The age at which consumers are least likely to make financial mistakes: a few months past their 53rd birthday, despite all the pressures that accompany middle age.

THE EUREKA MOMENT

Credit card issuers often lure customers by offering low-interest rates to consumers who transfer current balances to a new card. Borrowers pay attractively low teaser interest rates on the new balances for six to nine months. But new purchases on the new card incur a higher "annual percentage rate," in consumer finance jargon. "The catch," the economists say, "is that payments on the new card go first towards paying down the low-interest transferred balances, and only subsequently towards paying down the high-interest debt accumulated from new purchases."

Being economists, the four researchers say the "optimal strategy" is to make all new purchases on the old credit card and make no new purchases on the new card to which balances have been transferred, at least for...