Round Number Preferences and Left-Digit Bias: Evidence from Credit Card Repayments

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65 Pages Posted: 24 Apr 2020 Last revised: 8 Jan 2025

John Gathergood

University of Nottingham - School of Economics

University of Warwick - Warwick Business School

Date Written: January 08, 2025

We examine round number preferences and left-digit bias in credit card repayments. We

show half of all manual credit card payments are at a small set of round-number values,

although all values between the statement minimum and balance were permissible.We use

minimum payments, which place a floor on the payment value, to measure the strength of

rounding behaviour in a natural experiment. We find that when the minimum payment

level just rules out a round number from the bottom of the range of possible repayment

(e.g., a minimum payment of £50.01 just rules out a payment of £50.00), payments at the

next round number jump by 15–20% (e.g., payments at £60.00). That is, in response to a

smooth increase in minimum payments, the selected payments jump up a ladder of round

numbers when each lower rung is removed.

We also see a classic—though nuanced—left digit bias. When the balance increases such

that the left digit changes (e.g., from £1999 to £2000), payments in full drop by 3–8% as if

an increase in the left digit makes the balance seem much larger. But average repayments

increase by 10–15%, as smaller partial repayments are all dragged up the ladder rungs.

This preference for a small set of round numbers as payment values and this effect

of left digit bias on the level of repayment have policy implications. Rounding could be

used by policy makers to encourage faster paydown of credit card debt, using one-click

“rounds-ups”, defaults, or shrouding. These policy options could deliver interest savings of

up to 40%.

Keywords: credit cards, round numbers, heuristic, left digit bias

JEL Classification: D12, D14, G02, G20

Suggested Citation: Suggested Citation

Sakaguchi, Hiroaki and Gathergood, John and Stewart, Neil, Round Number Preferences and Left-Digit Bias: Evidence from Credit Card Repayments (January 08, 2025). Available at SSRN: https://ssrn.com/abstract=3564728 or http://dx.doi.org/10.2139/ssrn.3564728