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The Short Answer

Are Credit Card Companies Using Your Biases Against You?

How to make smart financial decisions, when offers are designed to know you better than you know yourself.

The short answer to the title's question is probably “Yes.” Many of us know that our behavioral biases can work against us when making decisions, but it may be unsettling to discover that companies are often intentionally taking advantage of those biases.

In several ways, companies cater their marketing to exploit the biases to which different groups are subject. For example, credit card companies have offers that target certain groups’ tendency to exhibit present bias. Research by Ru and Schoar found that one key aspect determines who receives these kinds of offers: a person’s education level. Less-educated individuals received credit card offers that more aggressively shrouded bad features (like high default APRs, high late fees, or high over-limit fees) via the positioning of the information, the font size, or the complexity of the content. They are also more likely to receive offers with lower introductory APRs but higher late and over-limit fees.