We document substantial cross-individual dispersion in U.S. credit card borrowing costs, even after controlling for borrower risk and card characteristics. That remaining dispersion arises because cross-lender pricing heterogeneity generates dispersion in annual percentage rate (APR) offers to borrowers, and borrowers vary in shopping intensity. Our empirics match administrative data to self-reported card shopping intensity and use instruments suggested by fair lending law to account for the endogeneity between APRs and search. The results show that shoppers versus nonshoppers pay APRs as different as those paid by borrowers in the best versus worst credit score deciles. We discuss implications for policy and practice.

Does borrowing at 400% APR do more harm than good? The U.S. Department of Defense thinks so and successfully lobbied for a 36% APR cap on loans to servicemen. But existing evidence on how access to high-interest debt affects borrowers is inconclusive. We estimate effects of payday loan access on enlisted personnel using exogenous variation in Air Force rules assigning personnel to bases across the United States, and within-state variation in lending laws over time. Airmen job performance and retention declines with payday loan access, and severely poor readiness increases. These effects are strongest among relatively inexperienced and financially unsophisticated airmen.

We explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a "stock" of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Individuals avoid overdrafts by making fewer low-balance debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.

[We posit that consumer lenders shroud interest rates and market "low monthly payments" to price discriminate on "fuzzy math" or "payment/interest bias": consumers' pervasive tendency to underestimate borrowing costs when an interest rate is not disclosed. We test whether mandated disclosure changes lenders' ability to price discriminate using withinhousehold interactions between payment/interest bias and policy-induced variation in the strength of Truth-in-Lending Act (TILA) enforcement across lenders and time. Weak TILA enforcement substantially widens the gap between rates paid by more-biased and lessbiased borrowers. TILA compliance costs appear to increase interest rates overall, making the net effect on interest rates ambiguous.]

[Expanding access to commercial credit is a key ingredient of financial development strategies. There is less consensus on whether expanding access to consumer credit helps borrowers, particularly when loans are extended at high interest rates. Popular skepticism about "unproductive," "usurious" lending is fueled by research highlighting behavioral biases that may induce overborrowing. We estimate the impacts of expanding access to consumer credit at a 200% annual percentage rate (APR) using a field experiment and follow-up data collection. The randomly assigned marginal loans produced significant net benefits for borrowers across a wide range of outcomes. There is also some evidence that the loans were profitable.]

We document substantial cross-individual dispersion in U.S. credit card borrowing costs, even after controlling for borrower risk and card characteristics. That remaining dispersion arises because cross-lender pricing heterogeneity generates dispersion in annual percentage rate (APR) offers to borrowers, and borrowers vary in shopping intensity. Our empirics match administrative data to self-reported card shopping intensity and use instruments suggested by fair lending law to account for the endogeneity between APRs and search. The results show that shoppers versus nonshoppers pay APRs as different as those paid by borrowers in the best versus worst credit score deciles. We discuss implications for policy and practice.

We explore dynamics of limited attention in the $35 billion market for checking overdrafts, using survey content as shocks to the salience of overdraft fees. Conditional on selection into surveys, individuals who face overdraft-related questions are less likely to incur a fee in the survey month. Taking multiple overdraft surveys builds a “stock” of attention that reduces overdrafts for up to two years. The effects are significant among consumers with lower education and financial literacy. Individuals avoid overdrafts by making fewer low-balance debit transactions and cancelling automatic recurring withdrawals. The results raise new questions about consumer financial protection policy.

We posit that consumer lenders shroud interest rates and market “low monthly payments” to price discriminate on “fuzzy math” or “payment/interest bias”: consumers' pervasive tendency to underestimate borrowing costs when an interest rate is not disclosed. We test whether mandated disclosure changes lenders' ability to price discriminate using within-household interactions between payment/interest bias and policy-induced variation in the strength of Truth-in-Lending Act (TILA) enforcement across lenders and time. Weak TILA enforcement substantially widens the gap between rates paid by more-biased and less-biased borrowers. TILA compliance costs appear to increase interest rates overall, making the net effect on interest rates ambiguous.

Expanding access to commercial credit is a key ingredient of financial development strategies. There is less consensus on whether expanding access to consumer credit helps borrowers, particularly when loans are extended at high interest rates. Popular skepticism about “unproductive,” “usurious” lending is fueled by research highlighting behavioral biases that may induce overborrowing. We estimate the impacts of expanding access to consumer credit at a 200% annual percentage rate (APR) using a field experiment and follow-up data collection. The randomly assigned marginal loans produced significant net benefits for borrowers across a wide range of outcomes. There is also some evidence that the loans were profitable.

A randomized encouragement design yields null average effects of a credit builder loan (CBL) on consumer credit scores. But machine learning algorithms indicate the nulls are due to stark, offsetting treatment effects depending on baseline installment credit activity. Delinquency on preexisting loan obligations drives the negative effects, suggesting that adding a CBL overextends some consumers and generates negative externalities on other lenders. More favorably for the market, CBL take-up generates positive selection on score improvements. Simple changes to CBL practice, particularly to provider screening and credit bureau reporting, could ameliorate the negative effects for consumers and the market.