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"Borrowing money costs money": Yes, but why not tell how much?


  • Franses, Ph.H.B.F.
  • Vlam, A.


Consumers have substantial debts. Examples concern mortgages but also debts for products such as clothing and books. Facing difficulties when dealing with interest rates and percentages computations is one of the reasons for those debts. Campaigns like “Borrowing money costs money” should make consumers aware of the consequences of borrowing money. We argue that the campaign would be more effective if the actual size of the debt is mentioned in monetary terms. We support our argument using experimental data.

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  • Franses, Ph.H.B.F. & Vlam, A., 2011. ""Borrowing money costs money": Yes, but why not tell how much?," Econometric Institute Research Papers EI 2011-02, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  • Handle: RePEc:ems:eureir:22235

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    1. Haipeng (Allan) Chen & Akshay R. Rao, 2007. "When Two Plus Two Is Not Equal to Four: Errors in Processing Multiple Percentage Changes," Journal of Consumer Research, Oxford University Press, vol. 34(3), pages 327-340, June.
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