A report into the behaviour of credit card holders paying off their debt has found that receiving SMS reminders can help them reduce the amounts they owe and save money on high interest fees.
The report, Credit When it’s Due, is based on a study by the Behavioural Economics Team of the Australian Government (BETA), the Treasury and the Westpac bank.
Assistant Minister for Treasury and Finance, Senator Zed Seselja said simple text reminders helped consumers pay off an extra $134 on average — an increase of 28 per cent.
“This single reminder had an effect 12 months later — with those receiving an SMS having paid off $365 more than those who didn’t,” Senator Seselja said.
“People who only make small repayments on their credit cards could be paying hundreds of dollars a year in high interest fees.”
He said every card was different, but some had an interest rate as high as 20 per cent, so the reminders could give a significant saving over the life of a debt.
“I recommend every bank offering a credit card to consider these results and the options for assisting customers to reduce debt,” Senator Seselja said.
The study drew on insights from the behavioural sciences, showing timely reminders, positive framing and salience could be effective in helping people to save.
“It’s only right we look at ways to help people save, and behavioural insights can play a key role in this,” Senator Seselja said.
“The field continues to show it can be effective in encouraging good financial decision-making — and I hope these results will have broader implications for other fields and products.”
The 42-page report can be accessed at this PS News link.
