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 study the effects of adult financial education using a large-scale randomized controlled trial linked to administrative credit register data. The intervention consists of a structured ten-hour personal finance course involving more than 10,000 people in Portugal. Six months after the program, treated individuals exhibit significant improvements in financial knowledge, especially among women, low-income and low-education individuals, and participants with low baseline financial literacy. The intervention also improves self-reported confidence, financial attitudes, and behaviors, including budgeting, saving, retirement planning, informed use of financial products, and financial market participation. Using loan-level administrative data, we find significant changes in debt management: treated individuals reduce reliance on high-cost credit card balances while preserving credit access, experience fewer delinquencies, and are more likely to renegotiate mortgages. Our results suggest that financial education can reduce financial literacy gaps and improve household balance sheet management, even within relatively affluent populations in high-income countries.

(Working Paper - February 2026; 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: HEC Paris (France), Stanford Financial Education Symposium (US), 18th International Behavioral Finance Conference (UK), European University Institute (Italy), CIRET/Banco de Portugal/KOF Workshop (Portugal), FMA Annual Meeting (US), Stockholm School of Economics (Sweden), IAPMEI (Portugal), 4th Banco de Portugal Winter Research Workshop (Portugal), G53 Network Brown Bag Lunch (online), OECD/INFE Workshop (online)

Forthcoming: ITAM Finance Conference (Mexico), Georgia Tech–Atlanta Fed Household Finance Conference (US), City MacroFinance Global Seminar (online), ESADE Spring Workshop (Spain), 19th LUBRAFIN Meeting (Brazil), 20th International Conference of Finance (Chile)