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Minimum Required Payment and Supplemental Information Disclosure Effects on Consumer Debt Repayment Decisions

Minimum Required Payment and Supplemental Information Disclosure Effects on Consumer Debt... Repayment decisions—how much of the loan to repay and when to make the payments—directly influence consumer debt levels. The authors examine how minimum required payment policy and loan information disclosed to consumers influence repayment decisions. They find that while presenting minimum required payment information has a negative impact on repayment decisions, increasing the minimum required level has a positive effect on repayment for most consumers. Experimental evidence from U.S. consumers shows that consumers’ propensity to pay the minimum required each month moderates these effects; U.K. credit card field data indicate that borrowers’ credit limit and balance due also moderate these effects. However, increasing the minimum level is unlikely to completely eliminate the negative effect of presenting minimum payment information. In addition, disclosing supplemental information, such as future interest cost and time needed to repay the loan, does not reduce the negative effects of including minimum payment information and has no substantial positive effect on repayments. This research offers new insights into the debt repayment process and has implications for consumers, lenders, and public policy. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Marketing Research SAGE

Minimum Required Payment and Supplemental Information Disclosure Effects on Consumer Debt Repayment Decisions

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References (35)

Publisher
SAGE
Copyright
© 2011 American Marketing Association
ISSN
0022-2437
eISSN
1547-7193
DOI
10.1509/jmkr.48.SPL.S60
Publisher site
See Article on Publisher Site

Abstract

Repayment decisions—how much of the loan to repay and when to make the payments—directly influence consumer debt levels. The authors examine how minimum required payment policy and loan information disclosed to consumers influence repayment decisions. They find that while presenting minimum required payment information has a negative impact on repayment decisions, increasing the minimum required level has a positive effect on repayment for most consumers. Experimental evidence from U.S. consumers shows that consumers’ propensity to pay the minimum required each month moderates these effects; U.K. credit card field data indicate that borrowers’ credit limit and balance due also moderate these effects. However, increasing the minimum level is unlikely to completely eliminate the negative effect of presenting minimum payment information. In addition, disclosing supplemental information, such as future interest cost and time needed to repay the loan, does not reduce the negative effects of including minimum payment information and has no substantial positive effect on repayments. This research offers new insights into the debt repayment process and has implications for consumers, lenders, and public policy.

Journal

Journal of Marketing ResearchSAGE

Published: Feb 1, 2011

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