Consumers Out Of Loop About Personal Credit

Online loan marketplace LendingTree’s recent survey shows many credit cardholders in the U.S. are unsure about their financial standing when it comes to their credit accounts.

Through its survey, LendingTree sought to learn more about the credit card behaviors, sentiments and knowledge of American consumers, the results of which were announced late last week.

According to LendingTree’s data, 42 percent of the 3,170 Americans surveyed admitted to not knowing the combined total credit limit for their credit cards, while 58 percent said they were unaware of the highest annual percentage rate (APR) of their credit cards.

“Credit cards can be a very convenient and beneficial form of payment when managed responsibly,” Doug Lebda, CEO of LendingTree, said in a company statement.

“But when you make purchases using a credit card and carry the balance from month to month, you incur interest — effectively increasing the price of your purchases by 15 to 25 percent, depending on your interest rate. Miscalculating a budget or not understanding how interest rates can affect your bottom line can lead to consumers being in unexpected credit card debt.”

The survey showed that many respondents, nearly 52 percent, consistently pay off their credit card balances each month, which may be why they do not have as much knowledge about their APRs.

But among the 58 percent who said their APRs were a mystery to them, almost 40 percent said they were carrying a balance on their credit cards to the next month, therefore incurring interest fees. This means about one-fifth of Americans with credit cards are paying interest without truly knowing what those interest payments are.

Another surprising finding was that some Americans are still in the dark about which credit score band they fall into. Many were also unsure of their credit utilization ratio — a calculation of the amount of debt owed versus the maximum credit debt allowance — based off their total credit limit.

“Credit bands only represent a general view of where one stands financially, and the bands can be pretty broad. Two individuals both with ‘very good’ credit scores can still get very different rates and offers. A person with a 750 score is likely to get a much better deal than someone with a 720,” Lebda continued.

“To get the best financial rates and offers, it’s best to keep track of your credit score and know what could affect it. Having a solid grasp of your credit situation can save you significant money, but it’s also just simply good practice to make sure your finances are correct and you’re not victim to a reporting error or credit fraud.”

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