Unsticking credit card repayments from the minimum: Advice, anchors and financial incentives

Patrick Hendy, Robert Slonim and Kadir Atalay

Journal of Behavioral and Experimental Finance, 2021, vol. 30, issue C

Abstract: A significant proportion of credit card users persistently make the minimum repayment on their debt. Using an online experiment, we study how behavioral factors (advice, anchoring, and financial incentives) affect minimum debt repayment behavior. Our results show that although information interventions (advice and anchoring) have significant nudging effects on increasing repayments, the interventions that combine information with financial incentives have the largest effect, roughly doubling the information effects. Our results show that advising individuals to make a higher repayment and offering a financial incentive has a significant impact on individual debt repayment decisions, and can thus substantially reduce future debt burden.

Keywords: Anchoring; Advice; Credit cards; Consumer finance; Minimum payments (search for similar items in EconPapers)
JEL-codes: D11 D14 G21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:30:y:2021:i:c:s2214635021000496

DOI: 10.1016/j.jbef.2021.100505

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