CAMBRIDGE, Mass.—A novel approach to repaying debt could help consumers free themselves from crushing credit card balances faster, according to new research.
Rather than asking borrowers to make payments toward their total balances, Harvard researchers tested a method that lets consumers choose which purchases to pay off each month, Harvard Business School reported.
Consumers who used the “repayment-by-purchase” method, on average, paid 12% more toward their balances, the study found.
“For people struggling to chip away at high balances, targeting specific items on their credit card bills can provide much-needed control and encouragement,” Harvard Business School reported in its analysis.
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