With U.S. household credit card debt at an all-time high of more than $1 trillion, delinquent payments can be more costly than ever. For companies, delinquencies can mean massive collection costs and write-offs of entire accounts. For consumers, delinquency can mean late fees, increased interest rates, downgraded credit scores, the loss of vehicles or homes, or even bankruptcy, despite their intentions to bring their accounts current by making a payment large enough to satisfy their credit card balance. Recent research indicates that simple modifications of automated phone prompts provide an inexpensive way for companies to help consumers make good on their intentions, benefiting both parties.
How Behavioral Economics Could Help Reduce Credit Card Delinquency
An experiment encouraged customers to commit to paying by a certain date.
July 26, 2018
Summary.
Credit card delinquencies are costly for companies and customers alike. Recent research indicates that simple modifications of automated phone prompts provide an inexpensive way for companies to help consumers make good on their intentions, benefiting both parties. Simply asking people to precisely express their intentions about when they will pay and to explicitly commit to paying by a certain date can have a big impact on repayment.
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Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Customer Focus. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Learn how to keep your customers—and their most important needs—front and center.