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Limited and varying consumer attention: evidence from shocks to the salience of bank overdraft fees

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  • Victor Stango
  • Jonathan Zinman

Abstract

The authors explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a "stock" of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Consumers avoid overdrafts not by increasing balances but by making fewer debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 11-17.

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Date of creation: 2011
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Handle: RePEc:fip:fedpwp:11-17

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Keywords: Overdrafts ; Consumer behavior;

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References

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  1. Karlan, Dean S. & McConnell, Margaret & Mullainathan, Sendhil & Zinman, Jonathan, 2010. "Getting to the Top of Mind: How Reminders Increase Saving," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7907, C.E.P.R. Discussion Papers.
  2. Marianne Bertrand & Dean S. Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Papers, Economic Growth Center, Yale University 918, Economic Growth Center, Yale University.
  3. Bertrand, Marianne & Karlan, Dean & Mullainathan, Sendhil & Shafir, Eldar & Zinman, Jonathan, 2009. "What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment," Working Papers, Yale University, Department of Economics 58, Yale University, Department of Economics.
  4. Austan Goolsbee, 2000. "In A World Without Borders: The Impact Of Taxes On Internet Commerce," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 561-576, May.
  5. Xavier Gabaix & David Laibson, 2005. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," NBER Working Papers 11755, National Bureau of Economic Research, Inc.
  6. Jonathan Zinman, 2007. "Where is the missing credit card debt? Clues and implications," Payment Cards Center Discussion Paper, Federal Reserve Bank of Philadelphia 07-11, Federal Reserve Bank of Philadelphia.
  7. Sumit Agarwal & John C Driscoll & Xavier Gabaix & David Laibson, 2008. "Learning in the Credit Card Market," Levine's Working Paper Archive 122247000000002028, David K. Levine.
  8. Jeffrey T. Prince, 2008. "Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of Demand for Personal Computers," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 17(1), pages 1-33, 03.
  9. Justin R. Sydnor & Devin G. Pope & Nicola Lacetera, 2011. "Heuristic Thinking and Limited Attention in the Car Market," 2011 Meeting Papers, Society for Economic Dynamics 105, Society for Economic Dynamics.
  10. Eliaz, Kfir & Spiegler, Ran, 2006. "Consideration Sets and Competitive Marketing," MPRA Paper 21434, University Library of Munich, Germany, revised 03 Sep 2009.
  11. Victor Stango & Jonathan Zinman, 2009. "What Do Consumers Really Pay on Their Checking and Credit Card Accounts? Explicit, Implicit, and Avoidable Costs," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 424-29, May.
  12. Kolko, Jed, 2010. "A new measure of US residential broadband availability," Telecommunications Policy, Elsevier, Elsevier, vol. 34(3), pages 132-143, April.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Inattention and bank overdrafts
    by Economic Logician in Economic Logic on 2011-06-21 13:48:00
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Cited by:
  1. Armstrong, Mark & Vickers, John, 2012. "Consumer protection and contingent charges," MPRA Paper 37239, University Library of Munich, Germany.
  2. Felipe Kast & Stephan Meier & Dina Pomeranz, 2012. "Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device," NBER Working Papers 18417, National Bureau of Economic Research, Inc.
  3. Englmaier, Florian & Roider, Andreas & Sunde, Uwe, 2012. "The Role of Salience in Performance Schemes: Evidence from a Field Experiment," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8921, C.E.P.R. Discussion Papers.
  4. Stephanie M. Wilshusen, 2011. "Meeting the demand for debt relief," Payment Cards Center Discussion Paper, Federal Reserve Bank of Philadelphia 11-04, Federal Reserve Bank of Philadelphia.
  5. Bresser, J.R. de, 2013. "Between goals and expectations. Essays on pensions and retirement," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-5930485, Tilburg University.
  6. Chong, Alberto & Karlan, Dean & Shapiro, Jeremy & Zinman, Jonathan, 2013. "(Ineffective) messages to encourage recycling : evidence from a randomized evaluation in Peru," Policy Research Working Paper Series, The World Bank 6548, The World Bank.
  7. Ben Gilbert & Joshua S. Graff Zivin, 2013. "Dynamic Salience with Intermittent Billing: Evidence from Smart Electricity Meters," NBER Working Papers 19510, National Bureau of Economic Research, Inc.

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  1. Economic Logic blog

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