Credit Card Churn Forecasting By Logistic Regression And Decision Tree

In this paper, two data mining algorithms are applied to build a churn prediction model using credit card data collected from a real Chinese bank. The contribution of four variable categories: customer information, card information, risk information, and transaction activity information are examined. The paper analyzes a process of dealing with variables when data is obtained from a database instead of a survey. Instead of considering the all 135 variables into the model directly, it selects the certain variables from the perspective of not only correlation but also economic sense. In addition to the accuracy of analytic results, the paper designs a misclassification cost measurement by taking the two types error and the economic sense into account, which is more suitable to evaluate the credit card churn prediction model. The algorithms used in this study include logistic regression and decision tree which are proven mature and powerful classification algorithms. The test result shows that regression performs a little better than decision tree. (C) 2011 Elsevier Ltd. All rights reserved.