Nearly Half Of People Say They Were Never Taught About Credit Cards

Where did you learn how to handle credit cards? According to a new survey conducted by the website CreditCardsExplained.com, there's almost a 50% chance that you're self-taught.

The survey of 2,500 respondents showed that 45% of consumers never had a proper education on credit cards. Of those who received their credit card education in school, 22% were taught in high school, followed by 18% in college, and 8% in middle school.

Approximately 7% of consumers got their education on credit cards while filling out their application at the bank – a bit like learning how to drive just before you pull off the car lot and onto the freeway.

Just as driver's education is important to reduce the risk of an accident, credit card education is important to reduce the risk of a financial mishap. In both cases, learning the hard way can have lasting consequences.

How are we doing as consumers given the lack of formal education? Not bad, according to the survey results, but we could do better.

Almost one-quarter (23%) of consumers have no credit card debt at all. Just under half (49%) have debts of $5,000 or less, with 26% having debts under $1,000. Approximately 6% of consumers report owing over $20,000 on their credit cards.

Put that in context with the median household income in the U.S. – $57,617, according to Census Bureau data from 2016. If their incomes were at the median, the 6% of residents with debts over $20,000 would have credit card debts over one-third of their income – leaving little room for general living expenses, let alone mortgages or other debt like student loans or auto loans.

High-income households hold some of the high balances, but other consumers with high balances are living well beyond their means and are in danger of a debt spiral – where you can't even pay accumulated interest charges. Credit card education can help those near a debt spiral realize how close they are to an unrecoverable situation and pull back spending before it's too late.

At least most Americans (62%) have more in savings than in credit card debt. Men are likely to have more savings than debt, at 67% compared to 57% for women. Perhaps this reflects the income gap that makes it more difficult for women to accumulate savings. In 2017, women earned 82% of what their male counterparts earned, according to the Pew Research Center.

Why do some consumers struggle to pay off their cards? General costs of living, including housing costs, were cited by 31% as the main reason. Impulsive spending was second at 20%, followed by student loans at 17%.

However, the simple reason people struggle to pay off their bills is too much spending relative to income. Education on when and how to use credit cards – as well as learning how to establish a budget and stick to it – could help those struggling with credit card balances that are beyond their ability to pay.

Originally Posted at: https://www.moneytips.com/nearly-1-in-2-say-they-have-never-been-taught-credit-cards/466

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