I had one of those annoying situations occur over the break. I got an email (which I missed) from my credit card company notifying me that my automatic payment from my checking account had been returned by my bank. Something about a bad account number which was the SAME account number that I have used to pay the balance on my card (successfully) dozens of times. You know the drill from here with credit card companies, if your payment is not made on time, the late payment kicks in and interest charges and a higher penalty APR comes along for the ride. As a customer who had NEVER made a late payment on this card, I was confident that a phone call would reverse all this nastiness and it DID (I blogged about how to negotiate your everyday expenses last year and that advice came through). Phew!
So, when I went to reset my automatic payment on my credit card back to the same account number that I have used countless times, I was dismayed to see this:
For those of you still reading, thank you, so what is the catch?
First, you see that the default amount for your automatic payment on your credit card is to pay the “Minimum payment due.” How many cardholders take that “minimum payment” as their default payment option (and run up lots of interest charges) instead of choosing the option “Pay off your balance in full” which is the second item on the drop down menu:)” Second, the payment is made automatically on your due date so if for whatever reason they have trouble processing your payment and you don’t respond IMMEDIATELY to fix the situation, well, you are stuck in the credit card DOOM loop that I described earlier.
If you haven’t read Thaler and Sunstein’s brilliant book Nudge, I encourage you to do it. Here is how they describe nudges:
“By a nudge we mean anything that influences our choices. A school cafeteria might try to nudge kids toward good diets by putting the healthiest foods at front. We think that it’s time for institutions, including government, to become much more user-friendly by enlisting the science of choice to make life easier for people and by gentling nudging them in directions that will make their lives better.”
I find this example of a credit card company “nudging” me to the minimum payment option to be an example of how a nudge can be used to lead you in the wrong direction. Now if they only credit card co. was reading this. Oh, in case you were wondering, this is the credit card company that rhymes with brace.
Give your students the skills to read and interpret the fine print of a credit card agreement.