Abstract: We study the redistributive effects of reward programs in consumer credit markets, where salient benefits often mask shrouded costs. Using granular information on over 200 million U.S. credit cards and comparing reward cards with otherwise similar non-reward cards, we find that sophisticated individuals profit at the expense of naïve consumers regardless of their income. To probe the underlying mechanisms, we exploit bank-initiated credit limit increases and show that rewards stimulate spending across all consumers but leave only naïve individuals with higher unpaid balances. Naïve consumers with multiple cards also follow a suboptimal balance-matching heuristic when repaying, incurring unnecessary costs. Banks incentivize reward cards by offering lower APRs than on non-reward cards, profiting from naïve consumers through interest and fee charges and from sophisticated individuals through interchange income. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas.

(Working Paper - March 2025) 

Coverage: The Economist, New York Times, Washington Post, Financial Times, Wall Street Journal, Politico, Fortune, Bloomberg (Wealth Economics), Bloomberg (Opinion), Vox, Forbes, CEPR VoxTalks (podcast), CNBC (with video), Business Insider, Marginal Revolution, Quartz, Motley Fool, View from the Wing, The Lever, Retail Industry Leaders Association

Conference and Seminar Presentations: NBER Summer Institute Household Finance 2025 (US), WFA Meeting 2023 (US), SFS Cavalcade 2023 (US), FIRS Conference 2022 (Hungary), 16th Swiss Winter Conference on Financial Intermediation (Switzerland), 2022 University of British Columbia Winter Finance Conference (Canada), IMF (US), Federal Reserve Board (US), 15th Queen Mary Behavioral Finance Working Group Conference (UK), 5th Bristol Banking Workshop (UK), European University Institute (Italy), 37th European Economic Association Meeting (Italy), 4rd VU Amsterdam Conference on Research in Behavioral Finance (Netherlands), 2022 IWFSAS (UK), Nova SBE (Portugal), George Washington University (US), World Bank (US), 4th Philadelphia Fed CFI Workshop on Payments, Lending, and Innovations in Consumer Finance (US), Bank of Portugal (Portugal), University of Luxembourg (Luxembourg), 3rd Georgia State CEAR/HEC Montreal RSI Household Finance Workshop (Canada), Federal Reserve/George Washington University Financial Literacy Seminar (US)

Abstract:  We evaluate the impact of a structured personal finance course through a randomized controlled trial involving over 5,000 adults in Portugal. Treated individuals exhibit significant improvements in financial knowledge, especially among women, low-income and financially excluded individuals, and those with low baseline literacy. The program also enhances confidence and attitudes toward personal finance, promoting more informed and effective decision-making. Treated participants are more likely to take responsibility for their financial well-being, engage in budgeting and planning, track income and expenses, and prepare for retirement. They display greater knowledge of financial assets and liabilities, increase savings and participation in financial markets, and are more likely to hold sophisticated mixed-rate mortgages while reducing reliance on costly consumer credit. Notably, they improve their knowledge of cryptocurrencies without increasing exposure. Treated participants are also less likely to experience financial distress. Our results suggest that targeted, evidence-based financial education can effectively close financial literacy gaps, even within relatively affluent populations in high-income countries.

(Preliminary Working Paper - August 2025; RCT in Progress - AEA RCT Registry)

Award: Best Non-Profit Adult Education Project - 2025 Money Awareness and Inclusion Awards (MAIA)

Coverage - in Portuguese:  CNN, SIC Notícias, RTP, Canal NOW, Diário de Notícias, ECO (1), ECO (2), Jornal de Negócios (1), Jornal de Negócios (2), Jornal Económico (1), Jornal Económico (2)

Conference and Seminar Presentations: Stanford Financial Education Symposium (US), European University Institute (Italy), 18th International Behavioral Finance Conference (UK), HEC Paris Entrepreneurship Workshop (France)