May 16, 2025 – AI-powered email reminders can significantly reduce costly overdraft fees by helping users pay closer attention to their finances, according to a new study by researchers at the Hebrew University of Jerusalem. The study, published in Management Science, included 39,000 users of the Mint personal finance app and found that simplified and strategically framed messages—especially those emphasizing loss avoidance—were the most effective.

While users with higher income and credit scores were more likely to act on the alerts, the findings highlight both the potential and limitations of AI-based financial nudges. Overdraft fees remain a costly burden, and according to the Consumer Federation of America, U.S. banks collected nearly $5 billion in overdraft fees in 2024.

“Our randomized study provides evidence that AI-based, tailored communication can positively influence financial behavior—but it must be accessible and actionable,” said Prof. Orly Sade, Dean of the Hebrew University Business School. “Simple, timely messages have the power to help people make better decisions, but we also need to consider broader systemic barriers for those in more challenging financial situations.”

AI-driven financial tools are transforming the way people manage their finances, offering real-time support that surpasses traditional budgeting. From predictive alerts that flag potential overdrafts to systems that automatically transfer funds to prevent shortfalls, these technologies offer practical solutions for everyday financial challenges. While they hold promise in helping users avoid unnecessary fees and build better habits, their impact depends on understanding what motivates individuals to use them and follow through on the guidance they provide. The AI system used in the study predicted when users were likely to incur overdraft fees and sent email reminders accordingly. These reminders varied in complexity and tone, allowing researchers to test both the impact of the alerts and the influence of message framing.

Key findings include:

  • Any reminder helped: Users who received an alert were less likely to incur overdraft charges.
  • Simplicity matters: Clear, concise messages were significantly more effective than complex ones.
  • Framing counts:
    • Messages framed negatively (e.g., “Avoid overdraft fees”) led to a 9% reduction in overdrafts the following week.
    • These users saved an average of $25 over four months.
    • Positively framed messages (“Save money”) also worked but were slightly less effective.
  • Who responded best: Alerts were most effective for users with fair-to-good credit and mid-to-high incomes—those who were more likely to act on the information.
  • Limits of nudging: Financially vulnerable users, such as those with low liquidity or credit limits, were less able to benefit from the reminders, indicating that behavioral nudges alone may not be sufficient.

This research contributes to the growing literature on human-computer interaction, digital nudging, and the use of AI for financial wellbeing. It also underscores the importance of designing interventions that are both behaviorally informed and grounded in real-world financial constraints.

The research paper titled “Using AI and Behavioral Finance to Cope with Limited Attention and Reduce Overdraft Fees” is now available in Management Science and can be accessed here.

Researchers: Daniel Ben-Davida , Ido Mintzb, Orly Sadea

Institutions: 1) Finance Department, Jerusalem School of Business, The Hebrew University of Jerusalem 2) Intuit