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  5. The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt

American Economic Journal:
Economic Policy

ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)

The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt

  • Benedict Guttman-Kenney
  • Paul Adams
  • Stefan Hunt
  • David Laibson
  • Neil Stewart
  • Jesse Leary
American Economic Journal: Economic Policy (Forthcoming)

Abstract

We test a nudge in a field experiment on credit cards. The nudge shrouds the Autopay enrollment option for cardholders to automatically pay exactly the credit card minimum payment each month. After six months, the nudge decreases the fraction of cardholders who only pay exactly the minimum by 23%. However, the nudge does not significantly reduce credit card debt. Nudged cardholders often choose Autopay amounts that are only slightly higher than the minimum payment. The nudge reduces Autopay enrollment, which increases missed payments. The nudge reduces manual payments by Autopay enrollees. Cardholders frequently lacking liquid cash best explains our results.

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