40% of credit card debtors don’t know their interest rate

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New York – January 10, 2022 – Credit card debt continues to be a significant issue in this country, even as total balances have fallen 13% since the fourth quarter of 2019, according to the Federal Reserve Bank of New York. Perhaps a contributing factor to the credit card debt problem: 40% of credit card debtors don’t even know their primary card’s interest rate with a balance, according to a new consumer survey commissioned by Bankrate. For more information, click here.

https://www.bankrate.com/finance/credit-cards/credit-card-features-survey/

The annual percentage rate of a credit card is insignificant if the cardholder pays the balance in full each month. However, according to new Bankrate data, 39% of cardholders are in debt month-to-month.

Bankrate measures the average credit card rate at 16.30%. That’s even higher (17.13%) among interest-rated accounts, reports the Federal Reserve. At 17.13%, a person making minimum payments on the average credit card balance ($ 5,525, according to Experian) would be in debt for over 16 years and owe more than $ 6,500 in interest. And the Fed has signaled that interest rates are expected to rise in 2022 and beyond.

When it comes to credit cards, there is not just one card that fits everyone’s personal circumstances. For example, someone with credit card debt should favor a 0% balance transfer card over travel rewards to help pay off the debt. Plus, personal finances change for everyone over time. Yet about half (49%) of credit card holders have never changed their most used card or it has been at least five years. This includes 26% who have never changed, 12% who last changed 5-10 years ago, and 11% who last changed at least a decade ago.

“If you haven’t signed up for a new credit card in a while, you’re missing out on something,” said Ted Rossman, senior industry analyst at Bankrate. “Over the past few months we’ve seen some of the best signup bonuses ever. And the ongoing incentives continue to evolve as well. As long as you’re paying in full and avoiding interest, it’s important to match your top expense categories with the right rewards cards. Or if you have credit card debt, signing up for a new card may give you an interest-free balance transfer for up to 21 months.

America’s favorite credit card feature is cashback: 41% of cardholders said cashback rewards are their preferred perk of the card they use most frequently. The second most common response was “it is accepted in most places” (14%), followed by “it has a low interest rate” (9%) and travel rewards (6%).

Even among balance carriers, cashback was the most popular response (30%), ahead of “it is accepted in most places” (18%) and “it has a low interest rate” (13%). .

Rossman notes, “It’s a big mistake chasing after rewards if you have month-to-month credit card debt. The average credit card load more than 16%, so the math doesn’t work in your favor. Even the most generous cash back cards tend to give no more than 5% cash back – and that only applies to certain categories, not all of your purchases. It’s hard to exceed an overall return of around 2% cashback. It’s good if you are able to pay in full and avoid interest, but if you have credit card debt, it’s much better to prioritize a debt repayment strategy.

Perhaps taking advantage of new benefits, 21% of credit card users changed their most used card in the past year. Among them, 53% say they change frequently. For 47%, this was the first time they had redeemed their primary credit card in some time. Banks created 53.1 million credit card accounts through September 2021 (most recent data available). That’s a record pace, according to Equifax.

The older you are, the more likely you are to stay with the same credit card year after year. 25% of baby boomers with credit cards have never changed their most used card and 31% have changed but that was at least five years ago. But many young adults are also guilty of complacency. For example, 27% of millennial credit cardholders have never changed their primary card and 16% have changed, but that was at least five years ago.

For the full list of the 2022 Bankrate Awards Credit Cards Category Winners, please visit: https://www.bankrate.com/awards/best-credit-cards-of-2022/

Methodology

Bankrate.com commissioned YouGov Plc to investigate. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,764 adults, of which 2,049 credit card holders and 804 have month-to-month credit card debt. Fieldwork was undertaken from December 1-3, 2021. The survey was conducted online and meets rigorous quality standards. It used a non-probability sample using both upstream quotas during collection and then a downstream weighting scheme designed and proven to provide nationally representative results.


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