Working Paper: NBER ID: w17028
Authors: Victor Stango; Jonathan Zinman
Abstract: We explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a "stock" of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Individuals avoid overdrafts by making fewer low-balance debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.
Keywords: Consumer Attention; Overdraft Fees; Financial Literacy; Public Policy
JEL Codes: D14; D18; G13; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased attention to account balances (G51) | Behavioral changes that reduce overdraft occurrences (G51) |
| Limited consumer attention (D19) | Impact on overdraft fees (G21) |
| Survey participation (C83) | Reduction in likelihood of incurring an overdraft fee (G21) |
| Each additional overdraft-related survey taken (G51) | Reduction in probability of incurring an overdraft fee (G21) |