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Reducing credit card delinquency using repayment reminders

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  • Campbell, Daniel
  • Grant, Andrew
  • Thorp, Susan

Abstract

Can digital repayment reminders reduce costly credit card delinquency? This paper analyzes data from a 2016 randomized controlled field trial of a reminder sent to 30-days-overdue credit card debtors via an app or online portal. The reminder significantly raised repayment rates, and amounts repaid, of high credit score delinquent debtors, but did not significantly raise the repayment rate of lower credit score delinquents. The reduction in average delinquency among treated debtors continues for at least 12 months after treatment and substantially reduces provisioning expenses of the credit provider. We find that 2.4 percentage points (CI 1.68–3.12) more treated than untreated debtors (64.3% compared with 61.9%) repay all arrears within the current repayment cycle. For the 84.4% of the sample who we observed logged in and saw the reminder, the effect rises to 2.7 percentage points (CI 1.95–3.50).

Suggested Citation

  • Campbell, Daniel & Grant, Andrew & Thorp, Susan, 2022. "Reducing credit card delinquency using repayment reminders," Journal of Banking & Finance, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:jbfina:v:142:y:2022:i:c:s0378426622001431
    DOI: 10.1016/j.jbankfin.2022.106549
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    Cited by:

    1. Nartey Menzo, Benjamin Prince & Mogre, Diana & Asuamah Yeboah, Samuel, 2024. "Beyond Income: The Complexities of Credit Risk in Developing Countries," MPRA Paper 122364, University Library of Munich, Germany, revised 20 Sep 2024.
    2. Jason Allen & Michael Boutros & Benedict Guttman-Kenney, 2024. "Credit Card Minimum Payment Restrictions," Staff Working Papers 24-26, Bank of Canada.

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    More about this item

    Keywords

    Consumer debt; Randomized controlled trial; Information avoidance; Credit score;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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