Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any credit card issuer.
Americans are not making well-informed decisions about their credit cards and losing out on hundreds of dollars each year as a result. For instance, over 1 in 10 Americans who pay off their balance completely say APR is the most important credit card feature to them – these are individuals who don’t pay interest and should focus on other card features that can provide them actual savings. All of this was revealed in a study carried out by analysts at ValuePenguin.com, which surveyed over 1,400 consumers. The survey’s most interesting findings are outlined below.
- More than 1 in 2 of those survyed don’t spend enough time researching credit cards. Close to 1 in 5 do no research at all, while 35% take just a few minutes.
- According to results, offers that come through the mail are the most successful way of getting people to apply for new credit cards – especially older adults. Its overall success rate is 28.69%.
- 3 out of 4 Americans own at least 1 credit card.
- 59% of consumers haven’t applied for a new credit card in 5+ years.
- Close to 1 in 2 people don’t pay off their credit balance each month.
- A majority of credit card users (55%) spend less than $500 a month.
- 3 out of 7 individuals reported that a card with ‘No Annual Fee’ is best for them.
- 43% of those surveyed reported being victims of credit card fraud – despite this, 17% of consumers don’t read through their credit card statement on a monthly basis.
What Do Americans Care About Most When Applying for a Credit Card?
|1. Rewards / Cash Back||32%|
|3. Annual Fees||29%|
|4. Brand (Chase, Citi, etc.)||8%|
|5. No FX Fee/EMV||2%|
Biggest Mistakes Americans Are Making With Their Credit Cards in 2015
40% of Americans are paying interest that they don’t have to. Nearly 1 in 2 people keep a rolling balance on their credit card, which means they are subject to interest. Out of that population, 83% have not applied for a new credit card in several years, meaning they are missing out on 0% balance transfer APR deals prevalent in today’s market – these can potentially offer hundreds of dollars in savings.
53% of consumers don’t spend enough time considering their options. Over half of those we surveyed admitted to only spending a few minutes or less studying up on credit cards before applying for one – nearly 1 in 5 do no research at all. This is problematic as it leaves consumers open to being taken advantage of through bad deals and hidden costs.
Close to 1 in 5 credit card users don’t look at their statement on a monthly basis. Erroneous or fraudulent charges on credit card bills are a reality. Out of the people surveyed, 43% reported being victims of credit card fraud. Considering that banks are not always good at realizing a credit card is being used fraudulently, 17% of American consumers put themselves at unnecessary risk by not monitoring their purchase history.
Notable Differences Among Demographics
More iOS users fall into higher spending categories than Android. Nearly 1 out 5 iPhone & iPad users spend $2,000 or more on their credit card. By contrast, just 11% of Android users spent as much. Despite spending more, iOS users were also the ones more likely to pay off their credit card balance in full at the end of each month (52.57% vs Android’s 42.72%).
More men than women are paying off their card balances. More than 59% of men surveyed paid their credit card balances in full each month – compared to just 46% of women. This correlated with women valuing APR most when applying for a new card (33%) compared most men who cared about the annual fee and rewards/cash back (54%).
Adults 30 to 59 years old are the worst at paying off their credit card bills. This is the only age group where the majority (56%) did not pay off their credit card balances at the end of each month. This is mostly true with low spenders within the group (those who spend less than $500 a month), and tends to get better with high spenders, who are presumably in a better financial situation overall. We think it interesting that this inability to pay off a credit card bill correlates with an age that tends to be most expensive – due to mortgage costs, childcare expenses, etc.
Those who are 45 and older spend significantly more on their credit cards. In general, as people got older they fell less and less into the smaller spending categories. Those 60+ had the largest population, by age, spending over $2,000 per month (17%). This is not a sign of risky financial behavior, as with age the likelihood of paying off your balance completely increased as well – 66% of those over 60 paid their credit balance in full each month.
Younger consumers care more about rewards, bonuses and perks. The 18 to 29 age group was the one that cared most about rewards, cash back and bonuses – 41% said this was what they valued the most when applying for a card. This may be a problem, as 40% of these young adults do not pay their monthly balances off in full. As a result, this population may not be benefit from rewards cards, as much as they would from one with 0% APR.
How do people learn about credit card offers?
Credit Card mailings offers work. While many of us may be annoyed by the junk mail many banks send out, we can’t blame them for trying. The survey revealed that a majority of Americans applied for their latest credit card after getting an offer for it in the mail.
Offers that come through the mail are most effective with 60+ year olds. The older an individual is, the more likely they are to apply for a credit card from a offer. Over 44% of individuals aged 60+ got their latest credit card this way. Keep this in mind when looking at the effectiveness of ways people heard about credit cards. The older age groups skewed the results slightly in favor of mailoffers.
Despite them being effective, 62.4% of consumers don’t actually read the credit card offers they receive in the mail.
18-29 Year olds are more likely to listen to someone else about credit cards. This age group mainly applied for credit cards after talking with a banker or friends/family. A number of different factors could potentially contribute. Firstly, this age group may be more susceptible to listening to an authority figure on the matter. Younger adults tend to have no/low credit, meaning a banker can also get them a deal on a credit card they may otherwise not be eligible for.
|1. Offer that came in the mail||29%|
|2. Financial Advisor||21%|
|4. Independent Research||19%|
|5. Online Ad||10%|
|6. TV Ad||2%|
The team at ValuePenguin commissioned an online survey from SurveyMonkey to understand consumer behavior around their credit cards. In aggregate, we collected 1,411 responses over a period of 7 days beginning on March 10, 2015. The survey consisted of 16 total questions about various aspects of credit card ownership, payment behavior, and choices. Data was collected from respondents across the contiguous United States aged 18 and above.