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The cost of anchoring on credit-card minimum repayments

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Stewart, Neil, 1974-. (2009) The cost of anchoring on credit-card minimum repayments. Psychological Science, Vol.20 (No.1). pp. 39-41. ISSN 0956-7976

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Official URL: http://dx.doi.org/10.1111/j.1467-9280.2008.02255.x

Abstract

About three quarters of credit card accounts attract interest charges. In the US, credit card debt is $951.7 billion of a total of $2,539.7 billion of consumer credit. In the UK, credit card debt is £55.1 billion of £174.4 billion of consumer credit. The 2005 US Bankruptcy Abuse Prevention and Consumer Protection Act and the 2003 UK Treasury Select Committee's report require lenders to collect a minimum payment of at least the interest accrued each month. Thus people are protected from the effects of compounding interest. But including minimum payment information has an unintended negative effect, because minimum payments act as psychological anchors.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance B Philosophy. Psychology. Religion > BF Psychology
Divisions:	Faculty of Science > Psychology
Library of Congress Subject Headings (LCSH):	Credit cards, Cognitive psychology, Decision making -- Research, Consumer behavior -- Research, Finance, Personal
Journal or Publication Title:	Psychological Science
Publisher:	Wiley-Blackwell Publishing, Inc.
ISSN:	0956-7976
Date:	January 2009
Volume:	Vol.20
Number:	No.1
Number of Pages:	3
Page Range:	pp. 39-41
Identification Number:	10.1111/j.1467-9280.2008.02255.x
Status:	Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Economic and Social Research Council (Great Britain) (ESRC)
Grant number:	RES-062-23-0952 (ESRC)
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URI:	http://wrap.warwick.ac.uk/id/eprint/2552