Evidence type: Evaluation i
Information about the programme design and rationale
Evidence about Financial Capability outcomes for programme participants
Evidence that the Financial Capability outcomes were caused by the programme
Evidence about programme implementation, feasibility, and piloting
Evidence about relative costs and benefits 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.
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.
Benedict Guttman-Kenney, Jesse Leary (Financial Conduct Authority) and Neil Stewart (Warwick Business School)