How an attention-drawing survey reduced overdraft fee expenditures by 3.7%

Intervention · Servicios financieros

Abstract

As banks shift from monthly fee structures to service fee structures (like ATM or overdraft fees), industry reports estimate that annual overdraft revenue has risen to 75% of explicit deposit account revenue and 6% of total net operating revenue.1 That adds up to an overdraft fee total of $30-40 billion paid annually and, roughly speaking, averages $150 per year per chequing account. Limited customer attention is often the given explanation for this recent skyrocketing of overdraft fees.

Researchers designed and monitored a nudge over four years to determine to what extent overdrafts are affected by shocks to chequing account holders’ attention. They distributed a financial literacy questionnaire— comprising overdraft-related questions—to a pool of participants. Its findings reflected a significant, immediate effect on behaviour among the participants: within a month of taking the survey, participants showed an estimated 3.7% reduction in probability of incurring overdraft fees.

Sources

[1] Burrhouse, Susan, Patricia Cashman, Robert Cordeiro, Timothy Critchfield, Yan Lee, Victoria Pawelski, and Katherine Samolyk. 2008. “FDIC Study of Bank Overdraft Programs.”

[2] Adamczyk, A. (2021, October 20). Overdraft fees hit another record high this year—here's how to avoid them. CNBC. https://www.cnbc.com/2021/10/20/overdraft-fees-hit-another-record-highheres-how-to-avoid-them.html

[3] Bluth, R. (2018, September 10). ADHD numbers are rising, and scientists are trying to understand why. The Washington Post. https://www.washingtonpost.com/national/health-science/adhd-numbers-are-rising-and-scientists-are-trying-to-understand-why/2018/09/07/a918d0f4-b07e-11e8-a20b-5f4f84429666_story.html

[4] Grubb, M. D. (2015). Consumer inattention and bill-shock regulation. The Review of Economic Studies, 82(1), 219-257.

[5] Hubler, S. Why coronavirus testing is falling short in many schools across the U.S. (2022, January 12). The New York Times - Breaking News, US News, World News and Videos. https://www.nytimes.com/2022/01/11/us/schools-covid-testing.html

[6]​​ Stango, V., & Zinman, J. (2014). Limited and varying consumer attention: Evidence from shocks to the salience of bank overdraft fees. The Review of Financial Studies, 27(4), 990-1030.

Notes illustration

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