The Round‐Number Advantage in Consumer Debt Payoff

Abstract

The current consumer debt epidemic in the United States has prompted research on how consumers make debt repayment decisions. Consistent with past research indicating that psychological biases affect how consumers manage and prioritize debt accounts, we show that a characteristic of the number representing the debt amount impacts the speed of debt repayment. Across three field studies and three experiments, we provide evidence that people are likely to more quickly pay off round‐number debts (e.g., moderately‐sized debt amounts that end in the digits 0 or 5) than debts of similar magnitude that are not round numbers. Furthermore, we show that this effect arises because of the cognitive ease of round numbers, which manifests itself in processing fluency and retrieval fluency. In addition to documenting this round‐number advantage, we demonstrate the effectiveness of a simple and costless rounding intervention for helping consumers repay their debts more quickly.