Financial decisions of households

Abstract

Left-digit bias refers to the tendency of individuals to focus attention on the leftmost digit of numerical information when making decisions. This paper tests for the existence of left-digit bias in the consumer credit card market. Using a regression-discontinuity design, I find sharp increases in credit card repayments around $1,000 monthly balance thresholds. The estimated effect, an approximately $20 increase in repayment, translates to about 4.35 percent of the average payment. However, I find smaller effects on future repayment behavior and the amount of future purchases. Finally, I find the effect to be stronger in higher self-reported income groups..