"Repayment-by-Purchase" Increases Consumer Debt Repayment.

This article examines the impact of a novel credit card repayment format called "repayment-by-purchase," which prompts consumers to allocate payments toward specific items or categories of purchases rather than the total balance owed. Across a large field experiment with Commonwealth Bank of Australia and five laboratory studies, repayment-by-purchase consistently increased the percentage of credit card debt repaid by an average of 17.32% compared to traditional balance repayment. The mechanism underlying this effect is that repayment-by-purchase enhances the salience of individual purchases, thereby increasing consumers’ perceived progress toward reducing debt and motivating higher payments. The effect holds regardless of whether purchases are durable or nondurable goods and is stronger when purchase labels are concrete and meaningful rather than abstract, suggesting that increased purchase salience rather than mere partitioning drives repayment increases. The research also finds no evidence that repayment-by-purchase leads to increased subsequent spending or choice overload, and it may reduce biases favoring repayment of nondurable over durable goods.