A new survey from LendEDU suggests that college students know surprisingly little about credit cards, finding that only 9.44% of those surveyed even know the current interest rate on their card.
Created in order to more completely understand financial literacy and how credit cards are used among current college students, the study was based on survey responses from 468 undergraduate and graduate students studying at three different 4-year institutions, two of which were public and the other private. While two of the colleges were in the Bay Area, the other is located on the East Coast.
The study, “April 2016 College Student Credit Card Survey,” takes a closer look at the use of credit cards by current college students in the United States. The authors write that while credit cards can help to build credit and teach financial responsibility when used correctly, they can also bring on high interest debt. The New York Federal Reserve reported in February that credit card balances rose to $733 billion by the end of the fourth quarter in 2015.
Survey results found that most college students know very little about their own credit cards. In all, 38.46% of respondents said they had credit cards in their own names. However, only 9.44% knew the current interest rate associated with their cards despite almost two-thirds of those with credit cards saying they held a balance. The actual balance carried by each student was unknown to the surveying team because they did not feel comfortable asking that question, although 93.33% of respondents did say that they knew the total balance due on their card within a $100 margin of error.
Of those who did not have a credit card, 46.53% said they were afraid of accumulating credit card debt.
The authors suggest that the previous financial crisis and increasing student loan balances could be causing many students to opt not to apply for a credit card. In addition, they discuss the Credit Card Accountability Responsibility and Disclosure Act, or the Credit CARD Act, from 2009 which tightened the ability to market at colleges and universities.
71.11% of respondents felt that paying their credit cards on time would impact their credit scores in a positive way. In addition, 71.53% said that credit cards were an important tool for building consumer credit.
This is the fourth study released by the company this year. In January a study was put together finding that current college student loan borrowers do not have much knowledge pertaining to student debt. The following month the company discovered that current student loan borrowers are anxious to pay off their debt. Meanwhile, a study in March discovered that current college students have trouble understanding the basics of credit scores and reporting.
Study authors say the information presented suggests a serious issue occurring across the country. They go on to say that more needs to be done in the way of personal finance education for young people, especially at the high school level.