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However, if the consumer continues to make minimal (or very low) refunds, there is little reward for their credit card debts, which means that high interest charges can quickly accrue. Persistent bearing of debts can also cause other issues, such as negative effects on people's creditworthiness or psychological state. There are two ways for the consumer to make a payment - either by hand at any time of the week (e.g. through on-line payments) or by creating a direct debit system itself.
Both cases require the consumer to make a contractually agreed payment. From earlier research, we know that this minimal amount can delay consumers' repayments - a psychic approach called anchorage or targeting. However, it is not always possible to make a decision on how much to repay. Our research has shown that the removal of the min redemption amount from the hand redemption monitor has had a large beneficial effect in two on-line, hyperothetical studies.
This has significantly raised the value of redemptions made. As part of a seperate, practical test, the provision of information on month invoices had no effect on the amount of redemption payments made manually. It was less effective in a live test of credit card holders to remove an express min. amount preference setting from the acceptance giro set-up screens.
It induced many more poeple to vote for higher acceptance giro charges as planned, and shifted poeple away from the minimal payment, but it did not cut credit card debts. On the one hand, this is because of the fact that higher levels of automated payment are compensated by lower levels of manually made payment by the consumer and, on the other hand, because they prevented some individuals from even establishing acceptance giros.
The focus of the information on the consumer with a standing order for the amount already established for the threshold led only to a small reduction in the threshold and not to a reduction in debts. They also confirm the results in other settings - such as automatic enrollment in pensions - that a change in the setting of policy options can have a drastic impact on policy options.
It is important to note that some of our results indicate that early impacts on decisions do not always lead to similar drastic impacts on consumers' results.