Research Report An Evaluation of the Impacts of Two “Rules of Thumb” for Credit Card Revolvers
Brett Theodos, Christina Plerhoples Stacy, Margaret Simms, Katya Abazajian, Rebecca Daniels, Devlin Hanson, Amanda Hahnel, Joanna Smith-Ramani
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Over half of all credit cardholders in the United States carried a balance from month to month in 2010, a financial habit that can get expensive quickly. Financial education programs can help people improve these behaviors, but they can be costly and results have been mixed.

In this Urban Institute study, we found that simple rules of thumb about credit card use can be an effective and inexpensive way to help people make better financial decisions.

Rules of thumb are simple, easily implemented guidelines, generally based on what consumers should do and less on why they should do it. These common-sense principles can reach consumers around the time they decide to buy something and may be easier to remember and use than lessons from a financial education class.

We partnered with Arizona Federal Credit Union to test this approach on nearly 14,000 credit card revolvers, people who carry debt on their credit card from month to month.

We created two rules of thumb to guide credit card use: “Don’t swipe the small stuff. Use cash when it’s under $20.” and “Credit keeps charging. It adds approximately 20 percent to the total.” Those rules were delivered to credit card revolvers through e-mail, as online web banners when they logged in, and as calendar magnets mailed to their addresses. A control group received no rules.

Rules of Thumb Overview 2

This study is the first rigorous test of rules of thumb–based financial education on consumer financial behavior.


We found that rules of thumb can be a cost-effective way to change consumer behavior. The effects were moderate, but the costs of delivering the rules were trivial, making the benefit–cost trade-off sizable.

  • Consumers who received the first rule of thumb had, on average, $104 less in revolving debt six months later; their balances were 2 percent lower than their baseline average. And it cost about 50 cents per person to deliver the rules of thumb to participants.
  • We did not find a significant change in credit card debt for the group who received the second rule of thumb, but we did see an effect among some subgroups.
  • The rules tended to work better for people under age 40. Participants under 40 who received the first rule had $173 less in revolving debt, and those under 40 who received the second rule had $160 less in debt.
  • For some subgroups, savings went down but net savings (savings minus their credit card balance) went up, suggesting that they spent less and substituted cash for credit.

The rules we created and tested are only an example of what the impact of rules of thumb might be. Tips, rules, nudges, and reminders will become more prevalent as we manage more of our financial lives on mobile platforms. Lenders already use these strategies, and so do personal financial management platforms. Given the low cost of implementation, rules of thumb are a promising method of delivering financial education and improving financial health.

Research Areas Wealth and financial well-being
Tags Family credit and debt
Policy Centers Metropolitan Housing and Communities Policy Center