Location of Repository

The cost of anchoring on credit-card minimum repayments

By Neil Stewart

Abstract

About three quarters of credit card accounts attract interest charges. In the US, credit card debt is $951.7 billion of a total of $2,539.7 billion of consumer credit. In the UK, credit card debt is £55.1 billion of £174.4 billion of consumer credit. The 2005 US Bankruptcy Abuse Prevention and Consumer Protection Act and the 2003 UK Treasury Select Committee's report require lenders to collect a minimum payment of at least the interest accrued each month. Thus people are protected from the effects of compounding interest. But including minimum payment information has an unintended negative effect, because minimum payments act as psychological anchors

Topics: HG, BF
Publisher: Wiley-Blackwell Publishing, Inc.
Year: 2009
OAI identifier: oai:wrap.warwick.ac.uk:2552

Suggested articles

Preview

Citations

  1. (1974). 27). Judgment under uncertainty: Heuristics and biases. doi
  2. (1996). A new look at anchoring effects: basic anchoring and its antecedents. doi
  3. (2003). Coherent arbitrariness": Stable demand curves without stable preferences. doi
  4. (2008). Nudge: Improving decisions about health, wealth, and happiness. doi
  5. (2000). Numeric judgments under uncertainty: The role of knowledge in anchoring. doi
  6. (1994). The limits of anchoring. doi
  7. (1999). The price of money: Consumers’ understanding of APRs and contract interest rates.
  8. (2006). We can do this the easy way or the hard way": Negative emotions, self regulation, and the law.

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.