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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

We 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. Individuals avoid overdrafts by making fewer low-balance 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17028.

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Date of creation: May 2011
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Publication status: published as Limited and Varying Consumer Attention: Evidence from Shocks to the Salience of Bank Overdraft Fees, forthcoming, Review of Financial Studies, with Victor Stango
Handle: RePEc:nbr:nberwo:17028

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  1. Nicola Lacetera & Devin G. Pope & Justin R. Sydnor, 2011. "Heuristic Thinking and Limited Attention in the Car Market," NBER Working Papers 17030, National Bureau of Economic Research, Inc.
  2. 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.
  3. Jonathan Zinman, 2009. "Where Is The Missing Credit Card Debt? Clues And Implications," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 249-265, 06.
  4. Kolko, Jed, 2010. "A new measure of US residential broadband availability," Telecommunications Policy, Elsevier, vol. 34(3), pages 132-143, April.
  5. Karlan, Dean & McConnell, Margaret & Mullainathan, Sendhil & Zinman, Jonathan, 2010. "Getting to the Top of Mind: How Reminders Increase Saving," Working Papers 82, Yale University, Department of Economics.
  6. Austan Goolsbee, 2000. "In A World Without Borders: The Impact Of Taxes On Internet Commerce," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 561-576, May.
  7. 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.
  8. Eliaz, Kfir & Spiegler, Ran, 2009. "Consideration Sets and Competitive Marketing," CEPR Discussion Papers 7456, C.E.P.R. Discussion Papers.
  9. 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 918, Economic Growth Center, Yale University.
  10. Marianne Bertrand & Dean Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2010. "What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 263-305, February.
  11. Jeffrey T. Prince, 2008. "Repeat Purchase amid Rapid Quality Improvement: Structural Estimation of Demand for Personal Computers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 1-33, 03.
  12. 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, vol. 99(2), pages 424-29, May.
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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. Bresser, J.R. de, 2013. "Between goals and expectations. Essays on pensions and retirement," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5930485, Tilburg University.
  3. Stephanie M. Wilshusen, 2011. "Meeting the demand for debt relief," Payment Cards Center Discussion Paper 11-04, Federal Reserve Bank of Philadelphia.
  4. 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.
  5. Englmaier, Florian & Roider, Andreas & Sunde, Uwe, 2012. "The Role of Salience in Performance Schemes: Evidence from a Field Experiment," IZA Discussion Papers 6448, Institute for the Study of Labor (IZA).
  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 6548, The World Bank.
  7. 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.

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