Americans are more educated about credit than they were before the recession started up; however, their knowledge about personal finance isn’t resulting in better decisions about credit and lending. A survey indicates that most Americans know the interest rates they are paying on their credit card and they know their credit rating. Even so, they continue to carry high interest credit card debt and don’t even know how to improve their credit scores.
The personal finance know-how is no good
A survey of personal financial knowledge by Harris Interactive on behalf of Lending Club shows that Americans still aren’t making the most of hard-learned instant cash credit lessons learned during the recession. Adults who are unaware of their credit score came in at 31 percent, compared to 45 percent who didn’t have a clue in 2007 according to a Bankrate, Inc. survey. Fewer adults (22 percent) who use a credit card don’t know the interest rate on the credit card they use most often (compared to 29 percent who reported not knowing in 2007, according to a National Foundation for Credit Counseling survey).
Credit card debt seems to prevail
Credit card companies will be glad to know that of those adults who do know the interest rates on their cards, the survey shows 31 percent have an interest rate of 20 percent or more and 64 percent pay 14 percent or more. Although 93 percent of credit card users know that it’s very possible to negotiate for a better rate, only 29 percent have ever tried to. Although closing a credit card account negatively impacts credit score, 18 percent believe it increases your credit score; 27 percent believed it has no impact. For those with debt other than a home mortgage, credit card debt is the most common type of debt overall (67 percent) and often the most expensive type of debt to carry.
Personal finance advice
To gain a lot of knowledge about personal finance, AOL Money Coach Jennifer Openshaw has advice for consumers who want to be smarter when it comes to credit. You need to figure out your card rates. Find out about all of the lower rates. About 68 percent of those who ask to get a lower rate are actually successful and build confidence in their financial savvy as well. Start with a target rate in mind, be assertive and ask for the supervisor if necessary.
You should know what makes a difference to your credit card
Openshaw makes the suggestion that you learn what affects your credit score. Know that closing older accounts reduces your balance-to-credit card limit ratio, which may actually lower your score. If you have any kind of trouble controlling your credit card spending, it may be better to take the temporary hit to your score so you have fewer sources of temptation. Finally, cut your costs on current debt, consider paying off all your debts with one lower interest rate bank loan, but don’t do it on a credit card.
More information on this topic
National Foundation for Credit Counseling