Information simplification and default choices improve financial decisions: A credit card statement experiment.

Abstract

We run a between-subjects experiment to test how better-organized credit card statements, written in simplified language and default choices, help people make better financial decisions. Participants were shown either a standard (control treatment), a simplified, or a simplified with anchored information statement of a credit card bill. While observing the bill, they were asked factual and decision-making questions. We find higher correct response rates and debt repayment levels in our simplified information and anchored treatments compared to the control treatment. Simplified information increases repayment levels by 3.13 %, on average, when participants can repay the total debt, and by 9.18 % when they can only repay 60 % of the total debt. We also provide evidence on the effect of default pre-filling payment choices on debt repayment. Participants were given a choice box filled with either the number zero or 100 % of the amount due. We find higher debt repayment levels when the default choice is the total amount due. Overall, a higher default amount increases repayment levels by 14.56 %, on average, when participants can repay the total debt, and by 3.14 % when they can only repay 60 % of the total debt.