Survey: Nearly Two-Thirds Believe Credit Card Balance Myth
Thanks to the Internet and the advent of many free FinTech tools, these days, there are many resources for consumers to turn to when it comes to credit education. In fact, these services seem to be having an impact as average FICO scores continue to reach new highs. Despite this, there are still plenty of mistakes and misconceptions out there. Recently, a survey of more than 1,000 Americans conducted by the site LendingTree found some good and bad news regarding consumers, their credit habits, and more.
Headlining the survey was the fact that a majority of respondents admitted to believing a big credit card myth. Of those surveyed, 65% believed that carrying a balance on their credit card from month to month could help them to build and improve their credit. What’s more, among Gen Zers, the number of those who believed this misconception rose to 79%. In reality, carrying a balance on a credit card is not required for building positive payment history. Instead, this mistake can be a costly one as cardholders will likely need to pay interest on their charges if they do not pay off their monthly statement balance in full.
Elsewhere in the survey, it was also discovered that 37% of respondents hadn’t checked their credit scores in more than three months. This includes 6% who say they’ve never checked it as well as 9% who say it’s been at least a year since they last monitored their scores. On the bright side, 45% report looking at their credit within the past month.
Turning to the potential benefits of credit cards, LendingTree found that 85% of those surveyed had at least one credit card that rewarded them with points, miles, or cashback. Yet, more than half (55%) of respondents noted that they didn’t always use a rewards card to make purchases. As for the types of rewards consumers prefer, cashback cards were the overwhelming favorite, with 85% of respondents stating a preference for those types of cards over travel rewards ones. That said, Millennials were more likely than the general population to prefer travel rewards cards, with one-fifth of those in that generation saying they’d opt for points and miles over cashback.
Commenting on the survey results — and the credit card balance misbelief more specifically — LendingTree chief credit analyst Matt Schulz stated, “The myth hurts cardholders because it costs them money. If they’re only carrying a small balance, it may not cost them a huge amount of money, but over time, it adds up.” Schulz went on to note, “It’s especially concerning for the youngest generation who could end up carrying a balance for several decades.”
Considering how much credit education has grown over the past decade, it’s somewhat surprising to see that such a large percentage of survey respondents still believe in the credit card balance myth. Similarly, with sites like Credit Karma and WalletHub offering free credit monitoring services, it’s now much easier for consumers to check their scores on a more frequent basis (AKA more often than once per year). Of course, educating everyone on these matters does take time — and, with new young Americans coming of age every day, there will always be another generation ready to learn. Thus, although surveys like this may lead to some disappointment, there are reasons to be hopeful about the strides being made and to stay the course.