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The Cost of Anchoring on Credit-Card Minimum Repayments

The Cost of Anchoring on Credit-Card Minimum Repayments PSYCHOLOGICAL SCIENCE Short Report The Cost of Anchoring on Credit-Card Minimum Repayments Neil Stewart University of Warwick About three quarters of credit-card accounts attract interest their outstanding balance, their most recent repayment, and the charges. In the United States, credit-card debt is $951.7 billion size of minimum repayment required. One hundred ninety-six of a total of $2,539.7 billion of consumer credit. In the United respondents had nonzero balances (M5 d1,284, Mdn5 d516); Kingdom, credit-card debt is d55.1 billion of d174.4 billion of of these, 113 paid the balance in full and 83 made a smaller consumer credit. The 2005 U.S. Bankruptcy Abuse Prevention repayment (M 5 17% of the balance, Mdn 5 8%), including and Consumer Protection Act and the 2003 United Kingdom 13 who made only the minimum repayment. The proportions Treasury Select Committee’s report require lenders to collect a making full, partial, and minimum repayments match United minimum repayment of at least the interest accrued each month. Kingdom credit-card industry statistics quite closely. One hun- Thus, people are protected from the effects of compounding dred sixty-five respondents reported the presence of minimum- interest. However, including minimum-repayment information repayment information (M 5 6.4% of the balance, Mdn 5 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Psychological Science SAGE

The Cost of Anchoring on Credit-Card Minimum Repayments

Psychological Science , Volume 20 (1): 3 – Jan 1, 2009

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References (6)

Publisher
SAGE
Copyright
© 2009 Association for Psychological Science
ISSN
0956-7976
eISSN
1467-9280
DOI
10.1111/j.1467-9280.2008.02255.x
pmid
19152539
Publisher site
See Article on Publisher Site

Abstract

PSYCHOLOGICAL SCIENCE Short Report The Cost of Anchoring on Credit-Card Minimum Repayments Neil Stewart University of Warwick About three quarters of credit-card accounts attract interest their outstanding balance, their most recent repayment, and the charges. In the United States, credit-card debt is $951.7 billion size of minimum repayment required. One hundred ninety-six of a total of $2,539.7 billion of consumer credit. In the United respondents had nonzero balances (M5 d1,284, Mdn5 d516); Kingdom, credit-card debt is d55.1 billion of d174.4 billion of of these, 113 paid the balance in full and 83 made a smaller consumer credit. The 2005 U.S. Bankruptcy Abuse Prevention repayment (M 5 17% of the balance, Mdn 5 8%), including and Consumer Protection Act and the 2003 United Kingdom 13 who made only the minimum repayment. The proportions Treasury Select Committee’s report require lenders to collect a making full, partial, and minimum repayments match United minimum repayment of at least the interest accrued each month. Kingdom credit-card industry statistics quite closely. One hun- Thus, people are protected from the effects of compounding dred sixty-five respondents reported the presence of minimum- interest. However, including minimum-repayment information repayment information (M 5 6.4% of the balance, Mdn 5

Journal

Psychological ScienceSAGE

Published: Jan 1, 2009

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