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.

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