Surprising Consequences of Innocuous Mobile Transaction Reminders of Credit Card Use

Excessive credit card use has been a serious concern across the world since the introduction of the payment method. In South Korea, credit card companies and the government collaborated on a behavioral intervention, the transaction reminder service, to help consumers better manage their credit. Credit card transactions trigger text message confirmations sent to users’ mobile phones, increasing the salience and memory of expenses and resulting in more controlled spending. Experimenting in an institutional setting in which one group receives reminders and the other does not, the authors combined difference-in-differences methodology with inverse probability treatment weighting to assimilate random assignment. The empirical findings show that this intervention counterintuitively brings an overall increase in spending. This increase is substantial among those who had been light to medium spenders before the implementation, whereas historically high spenders experience little to no change after receiving the transaction reminders. The results are consistent with a theory that users reallocate the mental effort of remembering their past spending (mental recordkeeping) to digital devices, leading to higher spending due to poor recall. These findings attest to the value of evaluating a policy before scaling it broadly.