45% of Americans Were Never Educated on Credit Card Use

45 percent of U.S. consumers were never educated on credit card use
Most likely you are self-taught about personal finance: 45 percent of consumers were never educated on credit card use, according to a survey  by the website Credit Cards Explained.

Of those who received their credit card education in school, 22 percent were taught in high school, followed by 18 percent in college, and 8 percent in middle school.

Approximately 7 percent 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.

Like Driver’s Ed

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

Here’s Context

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 percent of residents with debts over $20,000 would have credit card debts surpassing a 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.

Prevent Debt Spiral

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 percent) have more in savings than in credit card debt. Men are likely to have more savings than debt, at 67 percent compared to 57 percent for women.

Perhaps this reflects the income gap that makes it more difficult for women to accumulate savings.

In 2017, women earned 82 percent of what their male counterparts earned, according to the Pew Research Center.

Reasons for Struggle

Why do some consumers struggle to pay off their cards? General costs of living, including housing costs, were cited by 31 percent as the main reason.

Impulsive spending was second at 20 percent, followed by student loans at 17 percent.

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.

This article was provided by our partners at moneytips.com. Photo ©iStockphoto.com/fizkes

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