Tom Peters interviews Richard Thaler

At tompeters!:

Tom Peters: Did somebody nudge you into writing this book?

Richard Thaler: My coauthor, Cass Sunstein, who’s a great friend of mine. He’s one of the leading constitutional scholars of our generation. He likes writing books; I think he could write a book in a long weekend if he were pressed to do it…

TP: You say you can give us some help in making better decisions about money or wealth. There have been a number of articles recently about personal debt in this country. It’s escalating wildly. What are some nudges in this area?

RT: Both Cass and I are great procrastinators. Our bills get paid on time only if we make them automatic. I think the best thing people can do is set up a system where their credit cards get paid off automatically, and in full.

Now, of course, that’s not possible for people who have six month’s income worth of credit card debt. I think those people have to get on a plan to stop using their credit cards. I would suggest for people who have a big credit card balance that they stop using them, start paying them off, and get a debit card. Get a debit card without a credit line. Turn the credit line down. Then you’ve got a self-control device.

I heard a story about a woman who had a credit card with a credit limit. She discovered that she had spent one thousand dollars over the limit, which she didn’t think she could do. It turns out the credit card company was just being “accommodating.” They said they didn’t want to embarrass her by declining the card. Instead, they let her run up an extra thousand dollars, stuck her with a penalty, and raised her interest rate.

So in some cases, what we would like is for the credit card companies to enforce the limits. That’s another thing you could do—call your credit card company and say, “I want you to enforce my limit. Don’t let me spend any more than that.”

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