Limited and varying consumer attention: Evidence from shocks to the salience of bank overdraft fees

Abstract

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. © 2014 © The Author 2014. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com.