The Hidden Role of Contract Terms: The Case of Credit Card Minimum Payments in Mexico

• 成果类型: Article
• 署名作者: Medina, Paolina C.; Negrin, Jose L.
• 署名单位: Texas A&M University System; Texas A&M University College Station; Mays Business School; Bank of Mexico
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4006
• 发表日期: 2022
• 页码: 3856-3877
• 关键词: Credit cards; household; Consumer credit; regulation

摘要

This paper argues that thresholds in financial contracts act as implicit nudges in consumers' decisions. Exploiting a regulatory change to credit card minimum payments in Mexico, we find that a 1-percentage point change in minimum payments leads to a 0.87-percentage point change in actual payments, both expressed as a percentage of total balances. We decompose the effect of minimum payments into a constraining effect and a reference effect. The former captures the effect of minimum payments as a binding constraint and accounts for 59% of its total effect. The latter captures any remaining impact of changes in minimum payments beyond their constraining effect and represents 41% of the total. In turn, 67% of the reference effect is explained by the multiple heuristic: the tendency of consumers to pay whole-number multiples of the minimum payment.