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How do consumers avoid penalty fees? Evidence from credit cards
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Gathergood, John, Sakaguchi, Hiroaki, Stewart, Neil and Weber, Jörg (2020) How do consumers avoid penalty fees? Evidence from credit cards. Management Science . doi:10.1287/mnsc.2019.3568 (In Press)
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Official URL: https://doi.org/10.1287/mnsc.2019.3568
Abstract
Using data from multiple card issuers, we show that the most common penalty fee type incurred by credit card holders, late payment fees, declines sharply over the first few months of card life. This phenomenon is wholly due to some consumers adopting automatic payments after a late payment event, thereby insuring themselves against future late payment fees. Nonadopters, who remain on manual-only payments, experience an unchanged high likelihood of future fees, despite exhibiting ample levels of available liquidity. Our results show that heterogeneity in adopting account management features of financial products, such as automatic payments, is important for understanding who avoids financial mistakes.
| Item Type: | Journal Article | ||||||||||||
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| Subjects: | H Social Sciences > HG Finance | ||||||||||||
| Divisions: | Faculty of Science > Psychology Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Credit card fees, User charges, Direct deposit payments, Credit cards, Consumer protection -- Law and legislation -- Great Britain -- Econometric models | ||||||||||||
| Journal or Publication Title: | Management Science | ||||||||||||
| Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||||||
| ISSN: | 0025-1909 | ||||||||||||
| Official Date: | 13 May 2020 | ||||||||||||
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| Date of first compliant deposit: | 31 January 2020 | ||||||||||||
| DOI: | 10.1287/mnsc.2019.3568 | ||||||||||||
| Status: | Peer Reviewed | ||||||||||||
| Publication Status: | In Press | ||||||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||||||
| Copyright Holders: | Copyright © 2020, INFORMS | ||||||||||||
| RIOXX Funder/Project Grant: |
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