Tendency for consumers saddled with multiple debts to be motivated to reduce their total number of outstanding loans, rather than their total debt across loans.
Imagine that you have four different credit accounts with different balances, each of which has a different annual percentage rate (APR):
Account Debt balance APR
A $2,830 2.5%
B $3,476 2%
C $5,080 3.5%
D $7,200 3.25%
Suppose that you have just received a $3,000 government stimulus rebate and that you have decided to use the entire rebate to pay off debt. How much would you allocate to each account?
Account A ________
Account B ________
Account C ________
Account D ________
Participants who considered the interest rate of each debt (a normatively irrelevant attribute) are coded as biased.
Ayal, S., Hochman, G., & Zakay, D. (2011). Two sides of the same coin: Information processing style and reverse biases. Judgment and Decision Making, 6(4), 295–306.