Arbeitspapier

Time inconsistency and overdraft use: Evidence from transaction data and behavioral measurement experiments

Households regularly fail to make optimal financial decisions. But what are the underlying reasons for this? Using two conceptually distinct measures of time inconsistency based on bank account transaction data and behavioral measurement experiments, we show that the excessive use of bank account overdrafts is linked to time inconsistency. By contrast, there is no correlation between a survey-based measure of financial literacy and overdraft usage. Our results indicate that consumer education and information may not suffice to overcome mistakes in households' financial decision-making. Rather, behaviorally motivated interventions targeting specific biases in decision-making should also be considered as effective policy tools.

Language
Englisch

Bibliographic citation
Series: SAFE Working Paper ; No. 347

Classification
Wirtschaft
Household Saving; Personal Finance
Micro-Based Behavioral Economics: General‡
Subject
Household Finance
Paycheck Sensitivity
Fintech
Time Inconsistency
Time Preferences
Experiment
Behavioral Measurement

Event
Geistige Schöpfung
(who)
Gill, Andrej
Hett, Florian
Tischer, Johannes
Event
Veröffentlichung
(who)
Leibniz Institute for Financial Research SAFE
(where)
Frankfurt a. M.
(when)
2022

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Gill, Andrej
  • Hett, Florian
  • Tischer, Johannes
  • Leibniz Institute for Financial Research SAFE

Time of origin

  • 2022

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