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Do Nudges Reduce Borrowing and Consumer Confusion in the Credit Card Market?

Year: 2022
Type: article
Abstract: We study nudges that turn out to have precise null effects in reducing long‐run credit card debt. We test nudges across two field experiments covering 183,441 UK cardholders. Our first experiment studies nudges added to monthly credit card statements. Our second experiment studies letters and email nudges (separate from monthly statements) sent to cardholders who signed up to automatically pay the minimum required payment. In a follow‐up survey to our second experiment, we find that 96% of respondents underestimate the time it would take to fully repay a debt if the cardholder made only the minimum required payment. The nudges reduce this confusion, but underestimation remains overwhelmingly common.
Source: Economica
DOI: 10.1111/ecca.12427
Authors: Paul Adams, Benedict Guttman‐Kenney, Lucy Hayes, Stefan Hunt, David Laibson, Neil Stewart
Institutions: London School of Economics and Political Science, University of Chicago, Financial Conduct Authority, National Bureau of Economic Research, Harvard University, University of Warwick
Language: English
Open Access status: hybrid
Estimated APC paid: $3,000
Awards: The Network for Integrated Behavioural Science - The Science of Consumer Behaviour, G2200362534, Real-time evaluation of the effects of Covid-19 and policy responses on consumer and small business finances, Accumulating to choose, but accumulating what? Drift diffusion modelling of economic preference, G3678697519, Network for Integrated Behavioural Science, G6128599341, G7050801856, G7342147324, G8579886662
OpenAlex ID: W3208928103
FWCI: 2.373
Cites: 43
Cited by: 21
Related to: 10