Consumer Misunderstanding of Credit Card Use, Payments, and Debt: Causes and Solutions

The authors identify several judgmental biases related to paying off credit card debt. Participants with stronger numerical skills made fewer errors, as did those who used the new statement format mandated by Congress in the CARD Act of 2009. Study 1 shows that people underestimate how long it takes to eliminate a debt when payments barely cover interest owed. Study 2 shows that less numerate people tend to underestimate the monthly payment...