Jamestown Savings Bank, in renewing its credit card customers finds that of those customers scoring 40 points or less on its credit-scoring system, 35 percent (or a total of 10,615 credit customers) turned out to be delinquent credits resulting in total losses. This group of bad credit card loans averaged $6,800 in size per customer account. Examining its successful credit accounts Jamestown finds that 12% of its good customers (or a total of 3,640 customers) scored 40 points or less on the bank’s scoring system. These low scoring but good accounts generated about $1,700 in revenues each. If Jamestown’s credit card division follows the decision rule of granting credit cards only to those customers scoring more than 40 points and future credit accounts generate about the same average revenues and losses, about how much can the bank expect to save in net losses.
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