Evaluation Scotland Wales
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Weighing anchor on credit card debt

Evidence type: Evaluation i

Description of the programme

Around one-in-four payments on credit cards are at or close to the contractual minimum in the UK. The minimum payment option on credit card statements is often displayed prominently and presented as an easy-to-select option when customers are deciding how much to repay. Previous research found that removing the minimum payment information increased the amount consumers made in credit card payments. The author of this previous research (Stewart, 2009) argued that minimum payment information acts as a psychological anchor that reduces payments. Anchoring occurs when irrelevant information is presented to people, and biases their decision-making process or judgement. More recent research has gone further, to suggest that minimum payments often become a target as opposed to an anchor. Whether they are seen as targets or anchors, both result in the same outcomes with people only making their minimum credit card repayments.

This 2018 evaluation from the Financial Conduct Authority tests whether ‘de-anchoring’ payment choices (effectively stopping consumers from selecting minimum payments) helps to increase credit card payments and reduce debt.

The study

An intervention was trialled to de-anchor repayment choices from the minimum contractual repayment. The experiment was conducted as part of an online survey of credit card consumers. The target sample was consumers who had taken out a new credit card between January and May 2017. The survey took place in May 2017, and had 8,490 respondents. Of these, 6,462 participants allowed their survey data to be matched to their credit card and credit file data.

As part of the experiment, consumers were presented with a hypothetical credit card bill.

The control group received a hypothetical online credit card payment scenario, including choices for the full balance, minimum amount or another amount, as well as disclosure of information including the statement balance and the minimum contractual payment required. This is what would normally be received by consumers.

The treatment group were presented with a similar scenario, but with both the minimum payment choice and amount removed.

Key findings

  • In common with previous literature, the experiment finds that minimum payment information (stating the minimum amount and presenting the option to repay the minimum) have large effects on consumer payment choices.
  • There is an average effect among the treatment group of increasing the likelihood of repaying their credit card in full by almost 50%, compared to just 15% in the control group.
  • Removing the explicit option to repay the minimum option and the minimum repayment amount has a large effect on the distribution of payments, with the intervention effectively stopping consumers making only the minimum payment.
  • However, one issue is that the intervention can allow consumers to actually pay less than their minimum amount, accidentally incurring late payment charges. This is because they have the ‘free text’ option of entering the amount they would like to pay.
  • The authors develop a methodology for evaluating the external validity of their experiment, and find that hypothetical responses given in the survey are closely related to the same consumers’ actual credit card payments. This suggests that if the intervention were applied in the ‘real world’ then the impacts may be similar to those found in the experiment.
  • It appears that the lower the level of financial distress that is experienced by the consumer, the larger the effect of the intervention. However, there is not sufficient statistical power to state this conclusively as the numbers reporting being financially distressed in the survey are quite low.
  • The authors point out that financial constraints vary over time, so they would expect the intervention to result in consumers paying more in ‘good times’, resulting in less credit card debt and therefore lower contractual minimum payments in times when they were more financially stretched.
  • The authors confidently state that the intervention has strongly significant effects on increasing payments among those reporting not to be in financial distress.

Points to consider

  • Methodological strengths/weaknesses: Findings are tested for statistical significance, adding more robustness to the analysis.
  • A control group is used, allowing findings from the intervention group to be compared with a group not receiving the same intervention, for benchmarking purposes.
  • While the methodology appears sound, it must be stressed that the above findings are based on hypothetical experiments (though the external validation helps to alleviate these concerns).
  • Generalisability/ transferability: The evaluation is of significant interest to those looking to commission or authorise interventions designed to increase debt repayments, particularly in relation to credit cards.
  • Relevance: The findings are based on consumers from one UK lender, as well as using hypothetical trials, and should therefore not necessarily be seen as representative of the entire consumer market, or applicable to countries other than the UK.

Key info

Activities and setting
An experiment where interventions are measured against a control group to assess the impact of stopping customers selecting credit card repayments at the contractual minimum amount.
Programme delivered by
Financial Conduct Authority/UK credit card issuer
Year of publication
United Kingdom
Contact information

Benedict Guttman-Kenney, Jesse Leary (Financial Conduct Authority) and Neil Stewart (Warwick Business School)

Financial Conduct Authority