Author Summary
Many consumers struggle to pay off their credit card debt, in part because paying small portions of big bills often seems fruitless. We introduce a new credit card payment option, Refund Per Purchase, and examine its influence on both the amount consumers repay and their perception of progress toward debt reduction. With a typical refund, consumers simply enter the amount they wish to pay for their total balance, often the minimum payment required. With per-purchase reimbursement, on the other hand, consumers can select specific purchases (e.g., a coffee at Starbucks, a utility bill) that they want to reimburse and make payments specifically to “eliminate” those purchases. Five studies find that repayment per purchase increases awareness of what is being repaid, which increases perceptions of progress toward debt reduction, which in turn encourages higher repayment. In a large field experiment, credit card customers who were given the option to allocate their payment to specific purchase categories paid 12.18% more for their debt balance than a control group . These results advance our practical understanding of how consumers can be encouraged to pay more for their credit card debt and offer conceptual insight into how increased awareness and perceived goal progression improve consumers’ motivation to pay more. get out of debt.
