Imperfect Recall: The Impact of Composite Spending Information Disclosure on Credit Card Spending

Imperfect Recall: The Impact of Composite Spending Information Disclosure on Credit Card Spending

7 July, 2020    

In the past 30 years, consumer credit card debt has expanded tremendously. We know that consumers willingly pay more for the same product when using credit cards versus cash, contrary to the classical rational agent model. Research suggests that it happens due to three imperfections in the classical model: imperfect self-knowledge, imperfect willpower, and imperfect recall. Traditional solutions to credit abuse address the first two imperfections; we examine the third. We propose reminding consumers, on every receipt, how much they have spent cumulatively. We test the effect of this proposal on spending via a controlled experiment. We find that printing this additional information on credit card receipts leads to a significant 9.6% reduction in overall spending compared to the status quo. We discuss the public policy implications of this finding as well as implementation issues.

Similar Articles
How to Help the Poor to Save a Bit: Evidence from a Field Experiment in Kenya
Partnering with a savings product provider in Kenya, we tested the extent to which behavioral interventions and financial incentives can increase t...
Deposit Collectors
Informal lending and savings institutions exist around the world, and often include regular door-to-door deposit collection of cash. Some banks hav...
Impact of Bank Accounts on Migrant Savings and Remittances: Evidence from a Field Experiment
We use a randomized field experiment to estimate the effect of having a United States bank account on Mexican migrants’ savings and remittances. ...