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Do nudges reduce borrowing and consumer confusion in the credit card market?
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Adams, Paul, Guttman-Kenney, Benedict, Hayes, Lucy, Hunt, Stefan, Laibson, David and Stewart, Neil (2022) Do nudges reduce borrowing and consumer confusion in the credit card market? Economica, 89 (S1). S178-S199. doi:10.1111/ecca.12427 ISSN 0013-0427.
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Official URL: https://doi.org/10.1111/ecca.12427
Abstract
We test the effects of two nudges designed to reduce credit card indebtedness; our study uses field experiments on 183,441 UK credit cardholders. All of the nudges have two components: (i) they explain the negative consequences of making only the min- imum required payment and (ii) they recommend and logistically facilitate payments in excess of the minimum required payment. Our first experiment studies nudges that appear on monthly credit card statements. Our second experiment studies letters and email nudges (apart from monthly statements), which are sent to cardholders who have chosen to make automatic minimum payments. Both interventions generate no effect on economic outcomes by the end of our half-year observation period. In a follow-up survey, we find 96% of survey respondents in the control group underestimate the re- payment time generated by making only required minimum payments. The nudges substantially reduce the magnitude of this optimistic bias, but the bias remains over- whelmingly common.
| Item Type: | Journal Article | ||||||||||||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Credit cards, Credit cards -- Economic aspects , Economics -- Psychological aspects, Finance, Personal, Consumer credit, Choice (Psychology) -- Economic aspects, Decision making -- Psychological aspects, Consumer behavior, Credit card fees -- Law and legislation -- Econometric models, Consumer protection -- Law and legislation -- Econometric models | ||||||||||||||||||
| Journal or Publication Title: | Economica | ||||||||||||||||||
| Publisher: | Blackwell Publishing | ||||||||||||||||||
| ISSN: | 0013-0427 | ||||||||||||||||||
| Official Date: | June 2022 | ||||||||||||||||||
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| Volume: | 89 | ||||||||||||||||||
| Number: | S1 | ||||||||||||||||||
| Page Range: | S178-S199 | ||||||||||||||||||
| DOI: | 10.1111/ecca.12427 | ||||||||||||||||||
| Status: | Peer Reviewed | ||||||||||||||||||
| Publication Status: | Published | ||||||||||||||||||
| Access rights to Published version: | Open Access (Creative Commons) | ||||||||||||||||||
| Date of first compliant deposit: | 22 October 2021 | ||||||||||||||||||
| Date of first compliant Open Access: | 9 May 2022 | ||||||||||||||||||
| RIOXX Funder/Project Grant: |
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