"Borrowing money costs money": Yes, but why not tell how much?

Philip Hans Franses and Anita Vlam

No EI 2011-02, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Consumers have substantial debts. Examples concern mortgages but also debts for products such as clothing and books. Facing difficulties when dealing with interest rates and percentages computations is one of the reasons for those debts. Campaigns like “Borrowing money costs money” should make consumers aware of the consequences of borrowing money. We argue that the campaign would be more effective if the actual size of the debt is mentioned in monetary terms. We support our argument using experimental data.

Date: 2011-01-24
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