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 •Similar Articles
Nudging credit scores in the field: the effect of text reminders on creditworthiness in the United States
In this paper we present evidence from a field experiment on the effect of text message reminders and credit card APR (annual payment rate) informa...
To remit, or not to remit: that is the question. A remittance field experiment
We conduct a remittance field experiment among Salvadoran migrants in the metro DC area. Migrants need to decide whether or not to remit funds to a...
The Effect of Information on Demand for High-Load Insurance
High-load insurance products, such as extended warranties and rental car insurance, often are
criticized for the large profits they generate ...
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.