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Monday, June 4, 2012

Consumer Credit Use Rising, Despite Lack of Financial Knowledge and Bad Credit

According to Credit Card Select, a credit card comparison company, credit use is on the rise, despite recent findings showing that many Americans aren't satisfied with their level of financial understanding.

Credit Card Select

Quote start"The [credit] market really wasn't working. It was much more difficult for consumers to identify a good card from a bad one."Quote end

Scottsdale, AZ June 04, 2012

Although credit card use is rising, more than 40 percent of Americans don’t consider themselves financially literate, according to a recent consumer finance survey. Financial experts believe this minimal financial comprehension contributes to low credit and a misunderstanding of personal finance in general, which can be overwhelming to the average consumer.

“Before the Credit CARD Act, 100 percent of the cards we looked at included practices regulators found to be harmful or unfair," said Nick Bourke, director of the Pew research group’s Safe Credit Cards Project. "The [credit] market really wasn't working. It was much more difficult for consumers to identify a good card from a bad one," continued Bourke.

The majority of credit card agreements in the United States are written at a 12th-grade reading level, three grades above the average American’s reading comprehension.

Although the Credit CARD Act of 2009 attempted to increase safety and transparency for consumers by reforming credit card regulation, challenges remain and the need for financial education continues.

Post-Reform, Use of Credit among Consumers Remains High

Equifax released consumer credit data earlier this month indicating that the rate of newly issued bank cards increased by nearly 37 percent in February 2012 from the same time last year.

However, recent industry research suggests financial knowledge among U.S. adults and adolescents remains staggeringly low. According to the 2012 Consumer Financial Literacy Survey, when asked to assign themselves a grade level appropriate to their financial understanding, 42 percent of Americans did not award themselves a passing grade.

The National Endowment for Financial Education also found that fewer than 20 percent of teachers feel they are knowledgeable enough to teach personal finance curriculum to their students.

If Americans are trapped in a world of financial misinformation, and many educators find they lack the knowledge themselves, consumers are left with few options to turn to for financial education. Analysts attribute consumers’ lack of financial understanding to their confusion regarding what credit is available, and how to improve their financial standing and qualify for a better credit card.

The three credit bureaus maintain over 220 million consumer files in the United States, and 1 in 5 of those files belongs to a consumer with bad credit. According to TransUnion, the average debt per cardholder came to $4,962 at the end of Q1 2012.

Many Americans feel bombarded with so much financial information, but are unable to make sense of it. Minimal understanding of financial knowledge coupled with trouble regaining credit standing, presents a strong and evident need for viable consumer credit resources.

Credit Resource Offers Guidance

Shopping for a credit card involves more than simply choosing a card offered by your current provider. It’s an individualized process that lets consumers find a tool to help enhance their spending power, pay down debt, and improve their financial standing.

“Not everyone has the same needs so being able to compare features and benefits of multiple cards side by side can really help consumers find the cards that best suit their individual needs,” said Stephanie Cobb, Business Developer for Credit Card Select. “Our Credit Card Comparison Tool allows consumers to add their favorite cards to a compare bin or shopping cart so they can easily come back to them later and compare their favorites side by side.”

Comparing credit cards has typically been a complicated task, but makes it easy by matching consumers with card options that are more tailored to their needs, based on certain specifications including card type, brand, credit range and more. Credit Card Select partners directly with many of the leading credit card issuers in the consumer credit industry to provide hundreds of options complete with real customer reviews.