Credit card minimum payments are designed to ensure that individuals pay down their debt over time, and scheduling minimum automatic repayments helps to avoid forgetting to repay. Yet minimum payments have additional, unintended psychological default effects by drawing attention away from the card balance due. First, once individuals set the minimum automatic repayment as the default, they then neglect to make the occasional larger repayments they made previously. As a result, individuals incur considerably more credit card interest than late payment fees avoided. Using detailed transaction data, the authors show that approximately 8% of all of the interest ever paid is due to this effect. Second, manual credit card payments are lower when individuals are prompted with minimum payment information. Two new interventions to mitigate this effect are tested in an experiment, prompting full repayment and prompting those repaying little to pay more, with large counter effects. Hence, shrouding the minimum payment option for automatic and manual payments and directing attention to the full balance may remedy these unintended effects.

We provide the first tests to distinguish whether individual investors equally balance their overall portfolios (naïve portfolio diversification-NPD) or engage in naïve buying diversification (NBD)-equally balancing values in same-day purchases of multiple assets. We find NBD in purchases of multiple stocks, and in mixed purchases of individual stocks and funds. In contrast, there is little evidence of NPD. So investors seem to narrowly frame their buy-day decision. Simulation analysis suggests that NBD substantially reduces investor welfare. These findings suggest that behavioral finance theory should incorporate transactional as well as portfolio framing.

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People's risky decisions are susceptible to the social context in which they take place. Across three experiments using different paradigms, we investigated the influence of three social factors upon participants' decisions: the recipient of the decision‐making outcome (self, other, or joint), the nature of the relationship with the other agent (friend, stranger, or teammate), and the type of information that participants received about others' preferences: none at all, general information about how previous participants had decided, or information about a specific partner's preference. We found that participants' decisions about risk did not differ according to whether the outcome at stake was their own, another agent's, or a joint outcome, nor according to the type of information available. Participants did, however, adjust their preferences for risky options in light of social information.