Repay Now or Repay Later: Examining the Effects of Information Disclosure on Consumer Debt Repayment Decisions

Linda C. Salisbury, Boston College
Katherine N. Lemon, Boston College

Consumers are repaying debt more slowly than ever before. Experts argue that disclosing more information to credit consumers will enable them to reduce debt more effectively. We examine this within the context of credit card debt repayment, seeking to understand how information disclosure influences consumer repayment behavior. We examine effects of minimum required payment (MRP) and supplemental interest cost information on debt repayment decisions. We examine differential effects of “time” versus “money” information and temporal framing of cost information. Results reveal a strong negative effect of MRP information on repayment amount. This effect is attenuated by disclosing interest cost and time-to-payoff information. Temporal framing of information, consumer temporal orientation and financial knowledge moderate these effects. We provide insights into types of information (“time” versus “money”) that should be provided to consumers to improve debt repayment and specific marketing approaches that might reduce the firm’s credit risk by reducing default rates.

 

* Salisbury, Linda C. and Katherine N. Lemon (2009), “Repay Now or Repay Later: Examining the Effects of Information Disclosure on Consumer Debt Repayment Decisions,” Working Paper, Boston College.