Why do roughly two-thirds of Americans live paycheck to paycheck? How do half of all households not use budgets at all? Why are late fees a continued burden on people’s monthly expenses?
Will Tucker-Ray and several colleagues at Ideas42, a nonprofit behavioral design firm, pondered these questions and many more late one night in 2012, while researching what policies or practices might improve personal and consumer finance decisions. Their zaniest solution was also their best. “Somebody said, ‘What if you just had a fuel gauge on the credit card itself, like, it just told you how much you had left.”
It took a few years, but the company has finally built it—or at least a prototype. Feedback Card is a credit-card-shaped device with a built in display window. It syncs with a related phone app that converts your bank account information into a more understandable display, allowing them to mark recurring incoming and outgoing transactions, like when paychecks hit versus the money getting pulled for rent, utilities, a car payment, or some TV streaming subscription.
Take a look, set your savings goal, and load your account information onto to card to go buy stuff. Before or after each purchase, you can press a little on-card button, and it’ll flash how much of your daily, weekly, or monthly allowance you have left to spend. That info is updated in real time by just tapping the card to your phone. You can also link multiple cards for purchases.
“Personal finance is a challenge that we see out in the world, that we see in America, and certainly one that that even we see internally with our own team where it’s just not very enjoyable [to do],” says Tucker-Ray, a manager director at Ideas42 and the leader of this project.
For instance, the average American today has between seven to 10 recurring bills, often coming at different times of the month. At the same time, many common bank or credit card financial tracking services break out spending habits by sector (food, recreation, bills), which isn’t easy or practical to use. “It’s very difficult for people to quickly at a glance know what their financial situation is,” Tucker-Ray says.
Recent scientific research shows that improving people’s understanding of their day-to-day financial situation may well lead to behavioral change. According to the Journal of Consumer Policy, credit card users suffer from what’s been dubbed “imperfect recall,” often underestimating how much they’re really spending when they can’t see the money going out. In one experiment, buyers confronted with receipts that showed a running total each successive transaction ended up spending 10% less overall than their peers.
Ideas42 specializes in creating the sort of nudges that can shift people’s behavior for the greater good. For instance, the group has revamped confusing court summonses to keep more people out of jail, and honed supportive text messages to reduce the number of college drop outs.
Building an advanced tech product from scratch is a little different, so the group partnered with NID Security, a global display card manufacturer, and crowdsourced customer feedback about how the app should work and look on Mechanical Turk. Once the team built the prototype, Ideas42 convened a series of random field tests in New York and California, mostly by approaching students on college campuses and community parks.
Rather than sell the product directly, the nonprofit has open sourced its design, which Tucker-Ray says it will share for free with any financial institution, credit card company, or startup interested in marketing some variation in a way that leads to better money management. With some tinkering, it’s easy to see how it might work with Apple Pay, public transportation cards, and electronic benefit transfer programs like SNAP.
“This is something that definitely grows out of our personal frustration with the personal finance tools out there that in some ways seem to just make things even more complicated at times,” says Tucker-Ray. “We wanted we wanted to build something for people that didn’t want to spend all their time budgeting and then make it available to everyone.”