Psychological phenomenon surrounding credit card bills

For years, Brian Brandow had a good paying job, a nice house, and a boatload of credit card debt.

"We were spending more money than we were making and using credit cards to try to finance that."

And when the bill came each month, Brandow paid the minimum-- even when he could afford to pay more.

"We would take that money and look for other ways to spend it. We felt if we could make the minimum payment, regardless of the balance, that we would be okay."

Researchers estimate nine to 20-percent of Americans base payments on the minimum due even if they can pay extra.

A new study suggests a reason why: A psychological phenomenon called anchoring.

"Anchoring is the idea that some piece of information, maybe it's completely irrelevant information, is having an influence on your decision," said Ben Keys, Economist.

In this case, that's the minimum payment, which is always featured up front and center on your bill.

Keys co-authored the study on the phenomena.

"It's right in the dead center of every month's account statement. And I think a lot of consumers use that as a guide to influence their choices more strongly than they otherwise should."

While the card act of 2009 forced companies to add minimum payment disclosures to their bills, Keys says it has not stopped anchoring behavior and more steps are needed.

"I'd like to see credit card companies do more to inform their customers about the time that it takes to repay their debt if they're only paying the minimum, and give them online tools to allow them to develop a budget and a repayment plan that works for them."

As for Brandow and his family, it took four years of cutting spending, but today they are debt free.

"We just really kind of fell into the trap that everybody has a credit card, everybody has credit card debt; it's normal to do that. People need financial education."

Back in the 1970's, minimum payments hovered around five-percent of a person's current balance. Today most banks only charge one to two-percent of a cardholder's balance. Experts say this makes it much more difficult to get out of debt.