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

Author

Listed:
  • Benedict Guttman-Kenney
  • Paul Adams
  • Stefan Hunt
  • David Laibson
  • Neil Stewart
  • Jesse Leary

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 percent. 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.

Suggested Citation

  • Benedict Guttman-Kenney & Paul Adams & Stefan Hunt & David Laibson & Neil Stewart & Jesse Leary, 2025. "The Semblance of Success in Nudging Consumers to Pay Down Credit Card Debt," American Economic Journal: Economic Policy, American Economic Association, vol. 17(4), pages 72-105, November.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:4:p:72-105
    DOI: 10.1257/pol.20230568
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    Cited by:

    1. Masaya NISHIHATA & Yohei KOBAYASHI & Takayuki ISHIKAWA, 2026. "Nudging Automatic Debit for Property Tax: Evidence from two natural field experiments," Discussion papers 26023, Research Institute of Economy, Trade and Industry (RIETI).
    2. Christa Gibbs & Benedict Guttman-Kenney & Donghoon Lee & Scott Nelson & Wilbert van der Klaauw & Jialan Wang, 2025. "Consumer Credit Reporting Data," Journal of Economic Literature, American Economic Association, vol. 63(2), pages 598-636, June.
    3. Jason Allen & Michael Boutros & Benedict Guttman-Kenney, 2024. "Credit Card Minimum Payment Restrictions," Staff Working Papers 24-26, Bank of Canada.
    4. Jiang, Jiajun & Lee, Yi-Tsung & Liu, Yu-Jane & Meng, Juanjuan, 2025. "Inattention and credit card repayment date," Journal of Economic Behavior & Organization, Elsevier, vol. 230(C).

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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