Memory Shrouding in Credit Card Spending


James Choi, John Beshears, Brigitte Madrian, and David Laibson


Studies in psychology suggest that individuals may remember the past more positively than it actually was, such as when remembering a vacation. We would like to examine whether this tendency to misremember the past extends into household finances. Does an individual accurately remember how much she spent on her credit card, and is she more or less accurate at reporting her monthly credit card spending when that spending is farther in the past? Similarly, can an individual accurately predict how much they will spend in the coming month on his credit card?