Abstract
Financially non-optimal credit card debt repayment decisions cause many borrowers to incur substantial lifetime interest charges and dramatically extend the period of time to pay off their debt. The economics and psychology literature provides several reasons for this financially non-optimal behaviour including (a) Liquidity Constraints, (b) Present Bias, (c) Financial Illiteracy, and (d) “Sludge-type” Choice Architecture on banking payment apps. This presentation provides results from four online laboratory experiments designed to address Financial Illiteracy and potential biases, specifically Anchoring, that emerge from the Choice Architecture to nudge borrowers towards making higher payments.
The paper is joint with Elif Incekara Hafalir and Hanlin Lou.
Invited by: Stephanie Heger
Local Organizer: Stefania Bortolotti