Side Effects of Nudging: Evidence from a Randomized Intervention in the Credit Card Market

Regulating consumer financial products: Evidence from credit cards

Paolina C Medina

The Review of Financial Studies, 2021, vol. 34, issue 5, 2580-2607

Abstract: This paper studies the direct and indirect effects of nudging, by means of a field experiment with a financial management platform in Brazil. Reminders for upcoming credit card payments reduced credit card late-payment fees by 14%, but increased overdraft fees in checking accounts by 9%. The unintended effect is concentrated in users with a history of overdraft use. These users experienced a net increase of 5% in total fees, while the rest experienced savings of 15%. The results provide clear insights for nudge design: like any policy action, nudges can have side effects, and one size may not fit all.

JEL-codes: D03 D11 D14 G00 G02 G21 G28 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (15)

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