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Imperfect Recall: The Impact of Composite Spending Information Disclosure on Credit Card Spending

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Abstract

In the past 30 years, consumer credit card debt has expanded tremendously. We know that consumers willingly pay more for the same product when using credit cards versus cash, contrary to the classical rational agent model. Research suggests that it happens due to three imperfections in the classical model: imperfect self-knowledge, imperfect willpower, and imperfect recall. Traditional solutions to credit abuse address the first two imperfections; we examine the third. We propose reminding consumers, on every receipt, how much they have spent cumulatively. We test the effect of this proposal on spending via a controlled experiment. We find that printing this additional information on credit card receipts leads to a significant 9.6% reduction in overall spending compared to the status quo. We discuss the public policy implications of this finding as well as implementation issues.

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Notes

  1. We use a one-tail t test because we hypothesized that users of the expanded receipt version would spend specifically less than the control group, not simply a different amount (Mendenhall and Sincich 2003).

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Acknowledgments

Partial funding for this research was provided by J Whitney College of Business Summer Research Grant.

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Authors and Affiliations

  1. Department of Management & Marketing, Franklin P Perdue School of Business, Salisbury University, Salisbury, MD, 21801, USA

    Amit Poddar

  2. Department of Economics, University of Georgia, Athens, 30601, GA, USA

    Cameron M. Ellis

  3. Department of Management and Marketing, Southern Illinois University Edwardsville, Campus Box 1100, Edwardsville, 62026, IL, USA

    Timucin Ozcan

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  1. Amit Poddar
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  2. Cameron M. Ellis
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  3. Timucin Ozcan
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Correspondence to Timucin Ozcan.

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Poddar, A., M. Ellis, C. & Ozcan, T. Imperfect Recall: The Impact of Composite Spending Information Disclosure on Credit Card Spending. J Consum Policy 38, 93–104 (2015). https://doi.org/10.1007/s10603-014-9279-8

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