Keeping consumers in the red: Hedonic debt prioritization within multiple debt accounts

Ali Besharat, Sajeev Varki, Adam W. Craig

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

In our paper we contribute to the burgeoning literature in the psychology of debt repayment. Across three experiments, we explore the effects of the type (hedonic or utilitarian) and the timing of debt on consumers' debt repayment when managing multiple debt accounts. While prior literature has demonstrated that debtors who own multiple credit cards behave irrationally by paying down smaller balances rather than balances with higher interest rates, we found that debts incurred for hedonic purchases and in the distant past (versus proximal past) amplify this effect. The anticipated impact of debt repayment on consumption enjoyment is found to mediate this effect.

Original languageEnglish
Pages (from-to)311-316
Number of pages6
JournalJournal of Consumer Psychology
Volume25
Issue number2
DOIs
StatePublished - 2015

Bibliographical note

Publisher Copyright:
© 2014 Society for Consumer Psychology. Published by Elsevier Inc. All rights reserved.

Keywords

  • Credit card debt
  • Debt management
  • Debt type
  • Financial decisions

ASJC Scopus subject areas

  • Applied Psychology
  • Marketing

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