Trying to keep your debt down? Bring a loss frame to your credit card statement

Nudge blog reader and Booth School grad Faysal Mokadem thinks there is a way to reframe credit card statements to keep people from overspending. Instead listing the balance as a positive amount, Mokadem wants to list it as a negative.

For instance, say I have a credit limit of $10,000 and I have spent $8,500 throughout the month. Usually a credit card statement would read: – Credit $8,500. Available balance $1,500. This lets people feel that they have room to spend…

What if I had the following statement: You are -$8,500 and you can go down to -$10,000.

Framing the statement this way makes feel that you should move up to zero, rather than trying to stay below $10,000.

Mokadem says he tries to read his statements this way in order to motivate himself to keep his debt down. “Instead of feeling that I have a right to spend up to my available balance, I feel that I am under water or really in debt,” he says.

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  • bmuehlberger

    @Nudgeblog – As we like to say…losses do loom larger than gains…so this makes complete sense, but only from a consumer point of view. However, the credit card industry is looking at the issue from a completely differently lens. They would rather you spend up to your available credit and maintain a balance so that they can charge interest – at the highest possible levels. If consumer interests were of concern to the CC industry, then a possible loss frame might look more like: “You lost $8500 in buying power last month”.

  • Anonymous

    As we like to say…losses do loom larger than gains…so this makes complete sense, but only from a consumer point of view. However, the credit card industry is looking at the issue from a completely differently lens. They would rather you spend up to your available credit and maintain a balance so that they can charge interest – at the highest possible levels. If consumer interests were of concern to the CC industry, then a possible loss frame might look more like: “You lost $8500 in buying power last month”.

  • Anonymous

    As we like to say…losses do loom larger than gains…so this makes complete sense, but only from a consumer point of view. However, the credit card industry is looking at the issue from a completely differently lens. They would rather you spend up to your available credit and maintain a balance so that they can charge interest – at the highest possible levels. If consumer interests were of concern to the CC industry, then a possible loss frame might look more like: “You lost $8500 in buying power last month”.