Effects of a Tax-Time Savings Intervention on Use of Alternative Financial Services among Lower-Income Households

Mathieu R. Despard, Michal Grinstein-Weiss, Chunhui Ren, Shenyang Guo, Ramesh Raghavan

    Research output: Contribution to journalArticle

    Abstract

    Alternative financial services (AFS) such as check cashing and payday loans may help unbanked households meet transaction and credit needs, yet often at a very high price. Saving tax refunds can help low- and moderate-income (LMI) households build emergency savings as a way to reduce dependence on AFS and cope effectively with irregular cash flows and financial shocks. This study examined the impact on AFS use of message-based interventions encouraging LMI households to save their refunds when they electronically filed their federal income tax returns. We found that 3 out of 18 interventions resulted in statistically significant reductions in credit-related AFS use with small effect sizes. None of the interventions resulted in reduced transaction-related AFS use. Other factors—especially prior AFS use and financial shocks—were strong predictors of AFS. Financially vulnerable households may need additional opportunities and protections to reduce dependence on AFS.

    Original languageEnglish (US)
    Pages (from-to)355-379
    Number of pages25
    JournalJournal of Consumer Affairs
    Volume51
    Issue number2
    DOIs
    StatePublished - Jun 1 2017

    Fingerprint

    financial service
    taxes
    savings
    low income
    household income
    transaction
    credit
    time
    Tax
    Household
    Financial services
    Savings
    Low income
    income tax
    loan

    ASJC Scopus subject areas

    • Sociology and Political Science
    • Economics, Econometrics and Finance(all)

    Cite this

    Effects of a Tax-Time Savings Intervention on Use of Alternative Financial Services among Lower-Income Households. / Despard, Mathieu R.; Grinstein-Weiss, Michal; Ren, Chunhui; Guo, Shenyang; Raghavan, Ramesh.

    In: Journal of Consumer Affairs, Vol. 51, No. 2, 01.06.2017, p. 355-379.

    Research output: Contribution to journalArticle

    Despard, Mathieu R. ; Grinstein-Weiss, Michal ; Ren, Chunhui ; Guo, Shenyang ; Raghavan, Ramesh. / Effects of a Tax-Time Savings Intervention on Use of Alternative Financial Services among Lower-Income Households. In: Journal of Consumer Affairs. 2017 ; Vol. 51, No. 2. pp. 355-379.
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